U.S. Energy Exports – Council on Foreign Relations

U.S. energy security and its ability to project power have been enhanced by the shale revolution, but predictions of the United States becoming a “Saudi America” are overblown. Pundits and officials have floated arguments that the United States can flood the market with oil or deliver LNG to Ukraine as a response to Russian pressure, but experts see these ideas as fanciful. Tangible benefits of increased energy production and potential exports are more limited. They include, in the short run, a reduction in the U.S. trade deficit, promotion of freer international trade policies, and the development of spare oil and gas capacity that can stabilize prices in the event of disruptions due to sanctions or conflicts. These benefits diminish in the long run. The sanctions on Iran, for example, which forced it to begin negotiations about its nuclear program, wouldn’t have been as successful without the gain in U.S. output that helped offset the loss of Tehran’s oil output. While oil is a significant factor for U.S. foreign policy, Levi says it’s important to ask “what has the United States tried to do and couldn’t do because of its oil-trade relationships” to gauge U.S. power.

Energy exports from the United States won’t transform global markets, but they may have some effect on the margins. European countries squeezed by Russian energy policies can’t depend on U.S. exports. The European Union imports 24 percent of its natural gas from Russia—Germany sources 37 percent and Poland gets 59 percent of its gas from Russia, according to the Economist. Many countries have expanded storage facilities and built pipelines that can reverse the flow of gas, which helps reduce shortages, but finding alternatives to Russian gas will require an expansion of European gas exploration and more LNG imports. U.S. producers may choose to sell to European customers in the future if LNG prices are comparable to Asia, where they are higher. This commercial decision for both producers and consumers may keep many countries dependent on cheaper Russian gas and contend with the political cost.

As the United States envisions a strategic “pivot” to Asia by reducing its attention on a Middle East mired in conflicts and focusing on the dynamic economies to the east, speculation has surfaced about a diminishing political and economic role for the oil-rich monarchies in the Persian Gulf. Bassam Fattouh, a professor at London’s School of Oriental and African Studies, says Middle Eastern countries are both the main suppliers of energy to Asia and of spare capacity for global oil, thus an influencer of prices. This role forces the United States to maintain alliances in the Middle East even if it becomes an energy exporter.

via U.S. Energy Exports – Council on Foreign Relations.