Will the U.S. Enjoy “A Brighter Energy Outlook”?

By Daveed Gartenstein-Ross
The Truman Doctrine Blog
December 17, 2012

The National Intelligence Council’s newly released Global Trends 2030 report is an important read for anybody interested in the rapidly evolving national-security environment. One part of the report sure to be significant for those concerned about the U.S.’s addiction to oil (something that President Bush proclaimed in 2006) is a section entitled “A Brighter Energy Outlook.”

Based on the development of unconventional oil and gas in North America, this section is extremely optimistic, stating that “energy independence is not unrealistic for the U.S. in as short a period as 10-20 years.” This is not the first time such an optimistic assessment has been made about the future supply of energy: for example, Leonardo Maugeri’s June 2012 report for Harvard University’s Belfer Center for Science and International Affairs had a similar conclusion.

However, one must interpret the report’s conclusions with some caution with respect to our nation’s energy security. For one thing, projections that look this far ahead are inherently uncertain: as the report says, “the world could be transformed in radically different ways.” I believe that there is indeed legitimately significant good news about the U.S.’s energy future in the Global Trends report, as unconventional reserves will have a dramatic impact on the energy market. Thus, in this entry, I’m not going to challenge most of the assumptions underlying the report’s energy projections, though there are plenty of ways that the assumptions could be questioned. Rather, I want to explore whether, if the report is correct, policies designed to enhance the U.S.’s energy security should no longer be seen as a national priority. I believe there are compelling reasons that the U.S. should still work to diversity its supply of energy, particularly within the transportation sector.

First, Global Trends notes an expert consensus that “demand for energy will rise dramatically—about 50 percent—over the next 15-20 years.” Demand for energy will be driven by both economic growth and rising global population. Global demand currently stands at 90.5 million barrels of oil per day (bpd), and a 50% rise in demand will bring it to over 130 million bpd. A sufficient amount of oil must be pumped or obtained by hydraulic fracturing constantly, then refined, then brought to market to meet that 130 million+ bpd thirst. This skyrocketing global demand means that supply disruptions will remain a risk—which could be caused, for example, by a terrorist attack or by the increasingly extreme weather patterns that the report also predicts.

Second, the range of estimates offered by the report don’t necessarily make the U.S. an exporter of transportation fuels as soon as projected. In discussing increasing shale oil production, Global Trends notes preliminary estimates of “5-15 million barrels” of increased production by 2020, and based on this statistic that “the U.S. could emerge as a major energy exporter” by then.

Currently, the U.S. consumes 18.83 million barrels of oil per day, and, of that, 11.4 million bpd are imported. The International Energy Agency projects that U.S. consumption will decline by 1 million bpd by 2020 due to efficiency measures, but even so, if the amount of oil obtained from unconventional sources falls on the low or even medium end of the projections, the U.S. will still be a net oil importer in 2020. A production increase of 5 million bpd leaves the U.S. importing 5.4 million barrels, while a production increase of 10 million bpd leaves the U.S. importing about half a million barrels.

Third, if the U.S. does achieve energy independence, I have to wonder how long it would last, particularly if the U.S. becomes a major exporter, as Global Trends projects. It is vital that we bear in mind the U.S.’s troubling history in this regard. The U.S. was once the world’s largest oil exporter, and as Daniel Yergin notes, its “predominance in oil” was a decisive factor in its victory in the Second World War. But from there America ended up in the disastrous strategic position of the world’s biggest oil importer. From the Arab Oil Embargo in 1973 until the early twenty-first century, the fact that this was an extremely dangerous position was crystal clear.

And yet the U.S. never developed a comprehensive policy response to this vulnerability. There were some laudable policy initiatives, such as the Carter administration’s Fuel Use Act, which steeply reduced the electric grid’s reliance on oil, but despite that, America remains the world’s largest oil importer today.

We should bear this past policy paralysis in mind when we think about America’s energy future. The U.S. has a legitimate opportunity in the emerging energy environment—albeit one that may not be as remarkable as advertised—but it is important that we not be as short-sighted as we were in the past, or overlook the importance of strategic planning.

Daveed Gartenstein-Ross is a Contributing Writer for The Truman Doctrine. He is a senior fellow at the Foundation for Defense of Democracies and a Ph.D. candidate in world politics at the Catholic University of America. He is also the volume editor of From Energy Crisis to Energy Security: A Reader.

See the original article here.