Did you Know the United States is the largest energy power on the planet?
Yep, that's right, the United States has taken the position as the world's largest
fossil fuel producer. No other country, not even Russia or Saudi Arabia even come close
to the North American giant.
This energy revolution is having important consequences and it's changing politics
in the country - it's also the topic that we're addressing in this VisualPolitik
video...
Just eight years ago, the supply of petrol and natural gas was one of the biggest concerns
the USA had about their future. And, this wasn't a new concern... the country had
been dependent on foreign petrol and gas
for decades.
At the time it was said that the national security of the US relied on being able to
ensure the supply of natural gas and petrol to the industry and economy that was so dependant
on it. And this wasn't easy to do. At that time,
it's possible you remember it, the world seemed to be facing the imminent decline of
fossil fuels... It really did seem that we were about to run out...
Let's take a look at the situation in the US at the time.
(From the early 70s, the petrol reserves in the USA were shrinking year after year, production
had dropped around 50% and even the production of natural gas was starting to decline).
In other words, the United States were quickly running out of energy resources and they were
at the risk of having to rely on suppliers that... weren't exactly trustworthy in the
opinion of those responsible for national security. We are, of course, talking about
countries like Saudi Arabia, Russia, and Nigeria. However, things have changed a lot since then
and, as sometimes happens, the predictions were wrong and crude storage tanks around
the world are completely full! So, what's happening? Well, let's take a closer look.
A PETROL POWER RETURNS The United States has gone through an important
energy revolution in the last few years. Oil production has almost doubled and the reserves
which can be exploited guarantee the supply for many years.
Have a look at this chart from the Wall Street Journal - it shows the increase of oil production
in the US since 2011. As you can probably guess, the fact that the
US has almost doubled its oil production is closely related to the huge drops in oil prices
since 2014.
And it is not just the petrol, something really similar has happened with natural gas as well.
Today, the US is today the world's largest producer of both resources, and, as you can
imagine, this has had consequences on multiple fronts.
But' what has happened so this boom could take place? Well, as many of you know, it
is all due to a technological revolution known as FRACKING. This technology is not new, we've
known about it for decades... but until recently it wasn't really economically viable. .
Before we say anything else, fracking is a very controversial subject and, for now, it
is only used to produce petrol on a large-scale in four countries: The United States, Canada,
Russia, and Argentina. At the end of the video and in the description
below we are leaving a link to something that will explain how this process works. In its
defence we should mention that many of its problems have to do with it being a relatively
new technique. As the technique is being used and developed, its impact is being reduced.
Anyway... we will discuss all of that some other day. In this video we're going to
focus will on both the economic and political consequences of fracking.
FEEDING THE ECONOMIC ENGINE The oil revival of the US is closely related
to the economic recovery of the country over these last few years.
First of all, oil imports to the US have been reduced significantly in the United States
and, as laws of supply and demand apply, all this additional petrol supply has made the
prices drop. This means that the lesser amount of petrol that the country imports, is also
significantly cheaper.
This has caused the price of gas/petrol at the pump to fall... So much so that it is
estimated that American consumers are saving $150 billion a year.
This is money that is used for purchasing other products... setting up businesses...
putting into a savings account... But, hold on a minute because this is not
the end of today's story. Not even close... Cheaper petrol and gas also benefits industry,
and not just those that use this type of energy, but also industry that use it as their raw
material. I am, of course, talking about the petrochemical
industry, the one which produces plastic and PVC.
The combination of a large quantity of petrol
available, the certainty of supply, and low prices, are triggering an industrial boom
in the petrochemical sector. And pay close attention to the numbers, because they are
huge:
(The petrochemical sector is developing projects valued at $185 billion in the United States
alone. In 2016, these kinds of projects were 50% of the entire national industrial investment.
It is expected that these investments will turn the United States into a great plastic
exporter). And, just so you get an idea, they expect
that, in just a few years, the net exports of petrol-based products like plastics (and
also fertilizers and solvents) will exceed $110 billion a year. That is almost as much
as all of the petrol that Saudi Arabia exports.
('You've got to pinch yourself sometimes and say 'this is the envy of the world'.)
Neil Chapman, President of the Chemical Division at Exxon-Mobil.
Such business will certainly help the US reduce their trade deficit, a deficit that Trump
is always complaining about. But wait a second, because there is yet more...
The supply of petrol is no longer a priority or a concern for the country's national
security.
(In December 2015, the US Congress removed the prohibition on exports of natural gas
and petrol). Now, the US is about to become a net exporter
of natural gas, and it is calculated the US will sell an average of 1 million petrol barrels
per day in 2017.
'U.S. Oil Exports Double, Reshaping Vast Global Markets'. Wall Street Journal.
Well, the United States still imports foreign petrol, but much less than it used to. Further
because countries like to have energy security by diversifying their sources, many countries
are willing to pay a premium for this US supply. And you can be sure that the companies in
the US are taking advantage of it!
It is in natural gas where this change has been greatest. Until recently, the transport
of gas was difficult and huge gas pipelines were needed. But now, thanks to the technology
of liquefied natural gas it can be easily transported like petrol: in giant tankers.
The gas supplied this way is almost half of the world's supply, and here, American companies
are the superstars'
'The U.S. is now projected to be one of the top three natural-gas exporters in the
world by 2020'. The Wall Street Journal. Less imports, gas exports, a revival of the
industrial sector... It all looks like rather bad timing for Trump's protectionism.
And hold on a minute, because this energy revolution also has political consequences...
A DIPLOMATIC LEAP It's impossible to understand US international
politics if we don't consider the impact of this energy revolution.
Let me explain: up until now, the supply of petrol was a priority for national security.
The Middle East and oil, and gas producing countries, had an important role in the American
diplomatic agenda. But the new petrol scheme of the United States
has caused priorities to change. For example a new focus has been placed on Asia, which,
as we have talked about before is a gold mine of
Interestingly, without this change in priorities, Obama would have probably kept the troops
in Iraq, and the situation in Yemen, Libya or Syria would have been very different...
But, let's be extra clear, all of this petroleum means that the Middle East is not really that
important for the United States any more... A country that now can even afford to support
the so-called 'Arab NATO' which is something like... OK, you guys take care of your own
safety and we will give you a hand, you know, every now and again... To hopefully avoid
the risk of global crisis or something...
Needless to say this energy independence has also given Washington the opportunity to place
more demands on the petro monarchies of the Persian Gulf... Especially when it comes to
human rights.
And, by the way, if something is certain, it is Trump's support for fracking. The
new president wants to continue Obama's work, but do it faster, eliminating any obstacle
that might be in the way.
AMERICAN ENERGY FIRST Donald Trump has little doubt, he made the
promise during his campaign and has kept his word since taking office: his priority has
been to give petrol and gas development the green light.
Among other things, he promised to eliminate many of the rules and restrictions Obama passed
which could cause fracking to slow down. Trump wants cheap and abundant petrol and he's
willing to push to get it sooner rather than later.
Trump has also chosen to surround himself with key people closely related to the petroleum
industry. As a Secretary of State, Trump decide to go
for Rex Tillerson, who used to be the CEO of Exxon-Mobil - the largest oil company in
the world. Then there is Rick Perry, former governor of Texas, who has been placed in
change of the Department of Energy... Texas is a state that is very closely related to
the industry. And then there is the head of the US Environmental
Protection Agency, Scott Pruitt, the attorney general in Oklahoma, another State well connected
to the petroleum industry. Anyway, this is the revolution the US is going
through, a revolution which has put great limits on the power of OPEC.
Now, there is no question that fracking has its risks. But the reality is that it is a
technology that is not going anywhere, and it does seem that with time and development,
it is going to become safer. But, until that time comes, environmental
controls are essential... And, now it is your turn, do you think this
energy revolution is the start of a new era of cheap petrol? You can leave your opinion
in the comments as well as in this survey.
By the way, in this video, we tell you more about the petrol world and OPEC.
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they provided the vocals in this episode that are not mine. And as always, I'll see you
in the next video.