National security and energy policy experts have long called on the United States to diversify its sources of oil imports. These experts correctly asserted that in a time of limited domestic production and tension in the Middle East, ensuring U.S. energy security necessitated a variety of suppliers.
The African continent was often cited as one such potential source of oil. Academics, journalists and politicians predicted that the United States would acquire even larger amounts of oil from African producers, including large exporters like Nigeria and smaller petro-states such as Equatorial Guinea. For a time at least, they were right. Starting in 2002, the United States drastically increased its imports from established producers in Africa, most notably Nigeria, Angola and Algeria (The 5th, 6th and 9th largest suppliers of oil to the United States, respectively), and created relationships with new producers like Chad. As the United States looked to places outside the Middle East for its oil, several African nations seemed poised to become important suppliers.
All of that started to change in 2010. The international energy landscape began to shift dramatically as companies unlocked tight oil reserves in the United States through the use of hydraulic fracturing and horizontal drilling technologies. For the first time in decades, the United States has seen production increase, to 6.4 million barrels per day in 2012 (up 779,000 barrels from 2011). And the U.S. Energy Information Administration (EIA) predicts that the United States will increase crude output by another 900,000 barrels a day in 2013, largely from tight oil production.
On Friday, the State Department published a draft of the Supplemental Environmental Impact Statement for the proposed Keystone XL, which will inform the president’s decision later this year to approve or not approve the construction of the transboundary pipeline that could deliver an estimate 830,000 barrels a day of crude oil to the United States.
In a conference call on Friday, Assistant Secretary of State Kerri-Ann Jones noted that the EPA will officially publish the draft report in about a week for a 45-day public comment period. The president’s decision will come later this year, likely in the summer.
The 2,000-page report evaluates a number of issues, including the greenhouse gas emissions associated with Canadian oil sands and possible alternatives to the pipeline for transporting oil sands to the United States, including rail transport.
The oil sands, referred to in the draft report as Western Canadian Sedimentary Basin crudes, “are more GHG-intensive than the other heavy crudes they would replace or displace in U.S. refineries, and emit an estimated 17 percent more GHGs on a life-cycle basis than the average barrel of crude oil refined in the United States in 2005,” according to the report. “If the proposed Project were to induce growth in the rate of extraction in the oil sands, then it could cause GHG emissions greater than just its direct emissions.”
On Thursday, our friends Caitlin Werrell and Francesco Femia of the Center for Climate & Security will be at the Center for American Progress to release a new study on “Climate Change and the Arab Spring” that “outlines the complex pressures exerted by the effects of climate change on the convulsions which swept through the Middle East in 2010 and 2011, exploring the long-term trends in precipitation, agriculture, food prices, and migration which contributed to the social instability and violence which has transformed the region, and offering solutions for progress.”
The study builds off a seminal piece of work that Werrell and Femia published last February on how climate change and drought have influenced the social and political dynamics underpinning the revolution in Syria.
“Syria’s current social unrest is, in the most direct sense, a reaction to a brutal and out-of touch regime and a response to the political wave of change that began in Tunisia early last year,” they wrote. “However, that’s not the whole story.”
“The past few years have seen a number of significant social, economic, environmental and climatic changes in Syria that have eroded the social contract between citizen and government in the country, have strengthened the case for the opposition movement, and irreparably damaged the legitimacy of the al-Assad regime,” they wrote in February 2012. “If the international community and future policy-makers in Syria are to address and resolve the drivers of unrest in the country, these changes will have to be better explored and exposed.”
Their study was picked up by The New York Times’ Tom Friedman, who noted in April 2012 that “The Arab awakening was driven not only by political and economic stresses, but, less visibly, by environmental, population and climate stresses as well.
“If climate projections stay on their current path, the drought situation in North Africa and the Middle East is going to get progressively worse, and you will end up witnessing cycle after cycle of instability that may be the impetus for future authoritarian responses,” Femia told Friedman.
Friedman will join Werrell and Femia, along with former State Department Director of Policy Planning Anne-Marie Slaughter, on Thursday at the Center for American Progress for what is sure to be an informative discussion.
Check out the event details and RSVP here.
Happy Presidents' Day from the Natural Security Blog. We will be taking today off, but we look forward to returning to our regular Natural Security business tomorrow.
Photo: Mount Rushmore. Courtesy of flickr user Jvstin.
President Obama delivered his State of the Union address on Tuesday. In his speech, the president promised, in the absence of congressional action, to use his executive authority to address climate change and would seek recommendations from his Cabinet to help “prepare our communities for the consequences of climate change.”
Photo: Courtesy of Pete Souza and the White House.
Yesterday, CNAS published a new Flashpoints Bulletin that examines the influence global energy trends have in shaping oil and gas development in the South China Sea, and, consequently, the dynamic between countries in and around the region: Finding Common Ground: Energy, Security and Cooperation in the South China Sea (PDF).
In the piece, I highlight two important trends that are worth following that could add an additional layer of complexity to the South China Sea imbroglio: energy development as an element of India’s eastward engagement (i.e., Look East Policy); and China’s advances in deepwater drilling technology.
NASA successfully launched its new Landsat satellite on Monday, ensuring that the U.S. government will continue its ability to keep a close eye on environmental change from space, from receding glaciers, deforestation and coastal erosion to natural disasters.
We noted the importance of the Landsat Data Continuity Mission in our August 2011 policy brief, Blinded: The Decline of U.S. Earth Monitoring Capabilities and Its Consequences for National Security:
The health of the Landsat program, which provides information on topics from land use change to urbanization, is a top concern. One of the two remaining Landsat satellites is past its expected lifespan, and the other has declining capabilities. One replacement satellite, the Landsat Data Continuity Mission, has a planned launch date in 2012. The achievement of this mission and its successors is necessary to ensure that one of the most accomplished U.S. satellite programs, spanning nearly four decades, is not lost.
A report in The San Francisco Gate explained the satellite’s important functions and role in generating remote sensing data:
The newest Landsat is equipped with sensors that are more powerful than its predecessors. Once it reaches 440 miles above Earth, the satellite will zip around the planet 14 times a day, snapping hundreds of pictures that will be beamed back to ground stations in South Dakota, Alaska and Norway.
After a three-month checkout period, day-to-day operations will be turned over to the U.S. Geological Survey, which intends to make images and data free on the Internet as in previous Landsat missions. NASA developed the spacecraft and its two instruments.
Learn more about the Landsat Data Continuity Mission at NASA.gov.
On Monday, Quartz published a story about China’s growing foothold in Greenland and the mounting concerns about its quest to produce the semi-autonomous island’s rare earth metals. (See “China’s creep into Greenland is setting off alarm bells.”)
The New York Times reported last September that the retreating Greenland ice sheet is giving way to new opportunities for the 57,000 people living on the once sparse island. In particular, the melting ice is leading to new discoveries of mineral deposits, including rare earths. According to the report, the small Greenland town of Narsaq sits near one of the world’s largest deposits of rare earth elements – which are critical in the manufacturing of advanced technologies, from smart phones and smart bombs to wind turbines and high-end batteries. According to Greenland Minerals and Energy Ltd, the deposit could contain about 10.3 million metric tons of rare earth metals, equivalent to about 10 percent of the known global reserves (which total about 110 million metric tons, according to the U.S. Geological Survey).
Quartz reports that Western officials are particularly concerned about potential Chinese control of Greenland’s rare earth elements given that they are critical to advanced technologies and have few – if any – reliable manufacturing substitutes. (Some technologies can substitute rare earths, but they do not have the same effective properties.) Adding to the angst is the fact that China today produces about 97 percent of the world’s rare earth elements – even though it only holds 50 percent of the world’s known reserves, and that China has been limiting exports in order to satisfy its own domestic demand.
But how worried should Western officials be about China’s potential control of Greenland’s rare earths? A couple of points are worth mentioning that should help allay concerns.
First, China’s share of the rare earth market is in relative decline. Sure, China produces 97 percent of the world’s rare earth resources. But the United States has ample reserves as well; they are just not being produced – yet. According to the U.S. Geological Survey, the United States holds about 13 million metric tons of rare earths, or about 12 percent of the known global reserves. One of the largest mines is in California. While the United States used to produce these minerals, more rigorous environmental standards made it difficult for U.S. producers to compete with cheaper Chinese metals, and so U.S. producers stopped extracting them. But that is starting to change as prices rise. The market appears to be doing its thing, and the United States is ramping up U.S. rare earth production to compete with Chinese metals. Naturally this will help diversify the market. Moreover, Australia and Malaysia are also planning to increase production of their known reserves as well. Other countries are likely to follow suit, including India and other states in Central Asia.
Congress is continuing to give increasing attention to the changing energy landscape.
This morning at 10 a.m., the House Energy and Commerce Committee will hold a hearing on “American Energy Security and Innovation: An Assessment of North America’s Energy Resources.” Check out the complete witness list here.
Adam Sieminski, administrator of the U.S. Energy Information Administration, is among those expected to testify. In his prepared statement, Mr. Sieminski sizes up the recent boom in U.S. crude oil production, which he notes is driven largely by production of unconventional shale resources:
EIA estimates that U.S. total crude oil production (which includes lease condensates) averaged 6.4 million barrels per day (bbl/d) in 2012, an increase of 0.8 million bbl/d from the previous year driven largely by growth in tight oil production (Figures 1 and 2). This increase in U.S. annual production is the largest since Colonel Drake drilled the first crude oil well in Pennsylvania in 1859. EIA forecasts that another record increase in production will occur this year, with domestic crude oil production expected to increase to 7.3 million bbl/d in 2013. The 7.9 million bbl/d EIA currently forecasts for 2014 would mark the highest annual average level of production since 1988. Central to this projected growth will be ongoing development activity in key onshore basins. Drilling in tight oil plays in the Williston Basin’s Bakken formation in North Dakota and Montana, the Western Gulf Basin’s Eagle Ford formation, and the Permian Basin in Texas is expected to account for the bulk of forecast production growth over the next two years.
Senator Chuck Hagel, the president’s nominee for defense secretary, was joined by Senators John Warner and Sam Nunn prior to his confirmation hearing before the Senate Armed Services Committee on Thursday.
In his responses for the record, Senator Hagel addressed two important issues relevant to DOD energy and maritime security interests.
There was quite a bit of attention on the Hill yesterday as Senator Chuck Hagel, the president’s nominee to succeed Leon Panetta as defense secretary, met with the Senate Armed Services Committee in a daylong confirmation hearing. But while observers were captivated by the proceedings, other events on the Hill made headlines and are worth noting.
Senators John Barrasso (R-WY) and Mark Begich (D-AK) introduced new legislation that could foster U.S. liquefied natural gas (LNG) trade with U.S. strategic partners. According to The Hill’s Energy and Environment Blog: “The ‘Expedited LNG for American Allies Act’ would put NATO allies and Japan, which is seeking to expand imports as most of its nuclear capacity remains offline, on equal footing with the formal free-trade partners.”
While the proposed legislation names Japan and NATO countries in particular, The Hill also reported that the law could facilitate LNG trade with other strategic partners as well: “In addition to Japan and NATO countries, the new Senate bill would also require DOE to approve exports to other countries if the State Department, in consultation with the Defense Department, determines that it would promote U.S. security interests.”
Senator Barrasso issued a statement about the bill, noting that: “This will expand economic opportunities across America and help lower our nation's trade deficit. Our bill will also promote the energy security of key U.S. allies by helping reduce their dependence on oil and gas from countries, such as Russia and Iran.”
I noted in my January 9 post on the “Top U.S. Security and Foreign Policy Trends to Track in 2013” that U.S. policymakers are likely to develop a clearer position on the future of U.S. natural gas exports. Developments on this issue could happen faster that I initially suspected and are worth watching closely.
North America’s monopoly over shale gas and tight oil production won’t last forever. But there’s good reason to believe that the rest of the world will be laggards for awhile.
Steve LeVine at Quartz writes that despite massive shale potential outside of the North America, those deposits are far from being economically viable to exploit. “[D]rillers have yet not managed to economically drill for shale deposits anywhere else,” LeVine writes. “The difference is mainly in the shale geology—drillers have vastly more data on US shale than for any other place on the planet, and have not felt confident yet in what they have found in Europe, China or elsewhere.”
LeVine is correct that economics is a major driver in whether those resources will be recovered anytime soon. But other reasons abound as well. Most of the world’s oilfield services and the physical infrastructure associated with production (pipes, drill bits and other equipment), for example, are located in North America. That is why the immediate event preceding any major shale production outside North America won’t be an announcement that a company has signed a deal to develop the resources; it will be, as LeVine writes, “a company announcing investment in actual production infrastructure.”
Of course, beyond what the industry can control, other factors play into whether shale resources will be exploitable abroad as well. Access to the water resources needed to develop them is paramount. More importantly, sustainable access to water may be difficult to come by – especially for countries rich in shale resources but water scarce, like China and Australia. It is another important example of the water-energy nexus.
So North America will continue to monopolize shale production for now. The question for foreign policy types is whether or not that is a good thing. In 2010, the State Department launched its Unconventional Gas Technical Program aimed at helping other countries develop the skills and technology necessary to safely and economically exploit their shale resources. What other activities can or should the U.S. government be promoting? Are there public-private sector ventures worth pursuing? Or should the United States just enjoy its monopoly on shale production?
"We, the people, still believe that our obligations as Americans are not just to ourselves, but to all posterity. We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations. Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires and crippling drought and more powerful storms.
The path towards sustainable energy sources will be long and sometimes difficult. But America cannot resist this transition, we must lead it. We cannot cede to other nations the technology that will power new jobs and new industries, we must claim its promise. That’s how we will maintain our economic vitality and our national treasure -- our forests and waterways, our crop lands and snow-capped peaks. That is how we will preserve our planet, commanded to our care by God. That’s what will lend meaning to the creed our fathers once declared."
President Barack Obama, Second Inaugural Address, January 22, 2013
As President Obama begins his second term, there is no shortage of recommendations for how he should prioritize and shape his agenda moving forward.
Two new publications from the Brookings Institution and the Carnegie Endowment for International Peace offer sensible recommendations for how the administration should take advantage of the opportunities and confront the challenges of America’s windfall production in unconventional hydrocarbons – principally shale gas and tight oil. Both hark on the need for a balanced approach that would allow the United States to reap the energy and economic benefits from increased domestic energy production while seriously addressing the climate consequences of continuing to burn petroleum.
In their piece, “Energy and Climate: Black to Gold to Green,” Charles K. Ebinger and Kevin Massy of the Brookings Institution write that the United States can take advantage of oil and gas exports to energy hungry Asia while using the revenue from those exports to fund two potentially transformative technologies that are essential to reducing greenhouse gas emissions – carbon capture and sequestration technology and advanced batteries.
President Barack Obama officially began his second term yesterday when he took the oath of office in the White House Blue Room. This morning, shortly before noon, he will take the oath again on the steps of the West Front of the Capitol and deliver his formal second inaugural address.
What the president will say is a closely held secret, but many expect him to provide a broad vision for his second term priorities. He will have an opportunity to give more specifics in just a few short weeks when the president gives his State of the Union Address.
Will energy, climate change and natural resources be included in the president’s remarks today? It is hard to say. But I suspect there will be some mention. We can look back to four years ago and get a sense of how the president may touch on some of these issues in his remarks and his vision for addressing them:
The vision: “We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We'll restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories…With old friends and former foes, we'll work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet.”
Photo: Supreme Court Chief Justice John Roberts swears in President Barack Obama in the Blue Room of the White House on January 20, 2013. Courtesy of Lawrence Jackson.
In a World Politics Review article published last Friday, I wrote that despite record low ice melt last year, the Arctic’s harsh environment is not giving way to commercial growth as quickly as some may expect. For example, after a hopeful summer, Shell suspended its oil and gas exploratory drilling in part because its equipment kept getting damaged by dangerous ice floes and strong ocean currents. Operations are expected to resume this summer.
As a result, U.S. policymakers charged with safeguarding America’s interests in the Arctic should continually recalibrate their expectations for commercial and other activity in the region in order to enhance their planning efforts. After all, the kinds of resources that the U.S. Coast Guard and other federal agencies will need to bring to bear in the Arctic are linked to the pace and development of activity in the region. And while the Arctic may one day be buzzing with eco-tourists, oil and gas drillers and deep sea fishers, it may fall short of our expectations and we should plan accordingly.
Read the full piece on World Politics Review here.
“Evidence for climate change abounds, from the top of the atmosphere to the depths of the oceans,” reads a draft of the Third National Climate Assessment, published for public review by the U.S. Global Change Research Program on Friday.
The draft study is unequivocal about the state of climate change: it is already affecting Americans and it is primarily driven by human activity. According to an excerpt from the study’s executive summary:
Climate change is already affecting the American people. Certain types of weather events have become more frequent and/or intense, including heat waves, heavy downpours, and, in some regions, floods and droughts. Sea level is rising, oceans are becoming more acidic, and glaciers and arctic sea ice are melting. These changes are part of the pattern of global climate change, which is primarily driven by human activity.
The congressionally mandated study – a result of the Global Change Research Act of 1990 – is intended to provide policymakers with a better understanding of the impact of climate change on U.S interests – from human health and biodiversity to energy production and transportation. The assessment is required every four years, but in practice has been more ad hoc. (This assessment is the third one since the 1990 act was passed by congress.)
The study also provides useful insights to national security and foreign policy practitioners charged with navigating the changing global climate landscape and making sense of the impact on U.S. interests. While the study explores areas for mitigating climate change – that is, reducing greenhouse gas emissions that are adding to climate change – it also emphasizes adaptation to changes that are already locked in as a result of decades of emissions increases. According to the study, “Proactively preparing for climate change can reduce impacts, while also facilitating a more rapid and efficient response to changes as they happen.”
The draft study is worth a closer examination than we can provide here on the blog. Read the full report here.
The Shell drilling rig that ran aground off the Alaskan coast on New Year’s Eve was secured on Monday, officials said. The drilling rig Kulluk, pictured here on January 3, ran aground near an uninhabited island after a winter storm caused it to break free from the tug boat cables used to tow the vessel to Seattle. The grounding is the most recent in a string of setbacks for Shell’s Arctic drilling efforts and has given more evidence to critics charging that Shell and other international drilling companies are not yet Arctic ready.
The prospect of slower commercial activity in the Arctic should give pause to U.S. policymakers making plans for the Arctic. In particular, the resources necessary to protect U.S interests in the region – such as Coast Guard search and rescue and spill response assets – will depend in part on the pace of commercial activity in the region. These recent Arctic incidents should encourage policymakers to recalibrate their assumptions about activity in the region.
Photo: On January 3, the Kulluk remained grounded 40 miles southwest of Kodiak City, Alaska. Courtesy of the U.S. Coast Guard.
Natural resource and environmental issues have gained more attention from the national security and foreign policy communities in recent years– from concerns related to the U.S. rare earth supply chain to opportunities that might accrue from America’s growing abundance of natural gas. Which ones might get pressing attention in 2013? Here’s a list of the top U.S. policy trends I’ll be watching in 2013, in no particular order.
Natural resource trends topped international headlines in 2012 – from illicit resource trade in Afghanistan to energy competition in the South China Sea. Which ones should readers track in 2013? Here’s a list of the five international trends I’ll be watching in 2013, in no particular order.
My CNAS colleagues Melissa Dalton and Nora Bensahel published a policy brief recently assessing the state of U.S. policy toward Iraq a year after U.S. military forces completed their withdrawal from the country. Although U.S. policy toward Iraq has been drifting since the withdrawal, Dalton and Bensahel argue in Revitalizing the Partnership: The United States and Iraq a Year after Withdrawal that the United States has strategic interests in a strong, unified and sovereign Iraq.
Among some of the common interests shared by Iraq and the United States include Iraq’s continued progress in producing the country’s oil resources. According to Dalton and Bensahel:
Iraq’s substantial petroleum resources could rejuvenate the country’s economy if Iraq’s leaders can navigate the dispute between the KRG and the central government on oil-rich territory and enact critical hydrocarbon legislation. Iraq possesses an estimated 43 billion barrels of crude oil, the world’s fifth-largest oil reserves, and it surpassed Iran in terms of output in July. Iraq’s output could stabilize or agitate the global market, directly affecting the U.S. economy in the near term, although the United States may be less vulnerable to shocks as additional domestic oil resources come on line. Iraqi oil exports could help offset the negative impact on the global market of oil sanctions on Iran (as exports from Saudi Arabia have), but such exports may face stiff pressure from Iranian allies in Iraq.
Read more at CNAS.org.
Russia’s Zarubezhneft oil company has moved to shallower waters to continue drilling exploratory oil wells off Cuba’s coast, according to a report in the Washington Post on Saturday. The company’s new project comes after several failed attempts earlier this year to drill commercially-viable ultra-deep water oil wells off the Cuban coast. According to some estimates, there could be potentially 5 billion to 9 billion barrels of crude oil in deepwater off Cuba’s coast, a tenth of which may be commercially viable according to industry standards.
With fresh memories of the Gulf Coast Deepwater Horizon accident, U.S. government officials – including the U.S. Coast Guard – have been increasingly worried about offshore oil drilling in non-U.S. waters that could impact the U.S. coast if an accident occurs. Increased activity in Cuban waters is a particular concern for U.S. officials. A March 2012 The Washington Post report noted that Cuba’s capacity to respond to an offshore oil spill is extremely limited, with “only 5 percent of the resources needed to contain a spill approaching the size of the Deepwater Horizon disaster.” These concerns have also raised the question of how the United States could respond to an oil spill in Cuban waters given the state of U.S.-Cuba relations, including export restrictions that prohibit U.S. companies from providing equipment or otherwise performing response functions that could be construed as aiding the Cuban government.
In particular, the half-century old Cuban embargo obliges any company operating in Cuba to use only equipment that contains less than 10 percent U.S.-made parts in order to avoid sanctions. This means that companies operating in Cuba’s deepwater may not necessarily be using the most sophisticated or the safest tools and techniques shared by U.S. drilling companies. This might not be a concern in shallow water (several hundreds of feet deep), but in ultra deep water (depths beyond 1,500 meters), U.S. companies have a comparative advantage over many other international drilling companies. Moreover, deepwater drilling remains risky, even for U.S. companies. And while Zarubezhneft plans to drill in shallower water for its next project, it is still drilling in deep water: 6,500 meters.
The National Intelligence Council (NIC) published its Global Trends 2030: Alternative Worlds on Monday, a quadrennial analysis of the major trends shaping the global security environment. The report is intended to provide a framework for a new presidential administration to think about the threats and opportunities that lie ahead in the future security landscape.
The report examined four medgatrends that analysts believe will shape the world of tomorrow: individual empowerment; diffusion of power; demographic patterns; and the food, water, energy nexus.
The latter two trends directly affect each other. According to the NIC’s analysis, “Demand for these [food, water and energy] resources will grow substantially owing to an increase in the global population [demographics].”
Climate change is inextricably linked to the growing food, water and energy nexus. According to the report:
Demand for food, water, and energy will grow by approximately 35, 40, and 50 percent respectively owing to an increase in the global population and the consumption patterns of an expanding middle class. Climate change will worsen the outlook for the availability of these critical resources. Climate change analysis suggests that the severity of existing weather patterns will intensify, with wet areas getting wetter and dry and arid areas becoming more so. Much of the decline in precipitation will occur in the Middle East and northern Africa as well as western Central Asia, southern Europe, southern Africa, and the US Southwest.
We are not necessarily headed into a world of scarcities, but policymakers and their private sector partners will need to be proactive to avoid such a future. Many countries probably won’t have the wherewithal to avoid food and water shortages without massive help from outside.
Technology will play an interesting role in the future security landscape, particularly when it comes to energy, according to the NIC’s analysis. Technological breakthroughs in unconventional natural gas and oil production are contributing to an energy revolution in North America.
International trade in natural gas has been turned on its head. In 2005, the United States was on track to import nearly 20 percent of its natural gas by 2020. That forecast led to major U.S. investments in liquefied natural gas (LNG) import terminals in the American northeast, where hundreds of tankers a year were expected to offload LNG shipped from Europe and elsewhere. But the gap between U.S. consumption and production has been closing quickly as a result of hydraulic fracturing that has contributed to a glut in U.S. shale gas production. Now the United States is expected to be a net exporter of LNG by the end of the decade. And investors are looking for ways to modify the LNG terminals to reverse the flow of LNG trade that promises to usher in new opportunities for U.S. energy producers and foreign policy practitioners. [See: “The natural gas revolution reversing LNG tanker trade,” The Washington Post (December 7, 2012)]
Officials in Washington have been consumed by the question of whether or not the United States should prepare to export LNG. Policymakers are asking when and under what economic conditions would exporting LNG provide the best economic returns for the U.S. economy. A report released last week by the Department of Energy concluded that exporting LNG would help the U.S. economy across all the scenarios that economists forecasted, and that those benefits would increase as LNG exports grow in the future.
Many worry that exporting LNG could raise U.S. natural gas prices and hurt downstream consumers, like petrochemical companies and electricity consumers. But based on the models produced for the DOE study, natural gas prices are not likely to sharply increase in the near term. According to the study, “The largest price increases that would be observed after 5 more years of potentially growing exports could range from $0.22 to $1.11 (2010$/Mcf).” That would be about a 30 percent increase from today’s prices, which are around $3.70.
Yesterday, Admiral Samuel J. Locklear, Command of U.S. Pacific Command, briefed the Pentagon press corps on the U.S. military’s rebalance to the Asia Pacific. Admiral Locklear spoke specifically to the ongoing territorial disputes in the East and South China Seas, saying, “We call on all the parties there, including the Chinese, to ensure that, as they approach these problems, that they do so in a way that avoids conflict, that avoids miscalculation, that uses the vehicles available today through diplomacy and through those legal forums that allow them to get to reasonable solutions on these without resorting to coercion or conflict.”
Admiral Locklear was also asked about the growing concerns surrounding China’s aircraft carrier. He responded: “My assessment is that if I were China and I was in the economic position that China is in, and I was in a position of where I have to look after my global security interests, I would consider building an aircraft carrier. And I might consider building several aircraft carriers. So the real question is whether we should be concerned with them or not. Like any other country that builds aircraft carriers is whether or not those types of platforms will be successfully integrated into a global security environment that's a peaceful one. And they have a role in maintaining the peaceful global security environment. If the issue is that they are not part of that global security environment, then I think we have to be concerned about them.”
Read the full transcript from the press briefing here.
Photo: Courtesy of Glenn Fawcett and the Department of Defense.