Prof. ST Hsieh
Director, US-China Energy Industry Forum
February 19, 2022
Energy independent is good news. We are proud that with innovation and dedication, private sectors in the US achieved the milestone without much government intervention. The US free enterprise financial system is also a major factor, of course a mature oil and gas pipeline systems and standards quickened the process: the Shale revolution claimed victory about 15 years ago. President Trump claimed the “US Energy First” in 2017 and ushered in a global energy market revolution with massive geopolitical implications. Trump personally called Putin and Mohammed bin Salman then orchestrated a price stabilization plan for global oil market in 2020.
But energy independence is different from energy security. While the US produce and export primary energy including oil and gas, energy security has to ensure the consumers can access energy including electricity and gasoline at reasonable prices. COVID-19 Pandemic has ravaged the global supply chain, as a result inflation is rampart. The high gasoline prices in the US, riding on high inflation, is a major factor that drives down President Biden’s approval rating.
The imminent Ukraine crisis is already causing a global “energy crisis” that will last for a while. If, unfortunately, war broke out in Europe then no one can fathom how deep is the ensuing “energy crisis.” It should be noted that the Ukraine crisis has its roots on Europe’s energy security. Europe does not have any chance for an energy independence status like the US, but EU has to face up the reality and diversify its gas supply sources.
For the US, the large Strategic Poterium Reserve is out of date. The congress is working on a “cashing in” process. It should be accelerated, because fossil fuels are phased out very quickly due to global climate challenges. It will not mean that oil will be worthless anytime soon, but supply will outpace demands thus oil price will not increase for ever.
With abundant oil and gas supply far exceeds US domestic needs for the next few hundred years, exporting oil and gas is very good for US industry. While the US is the largest energy producer in the world, China is the world’s largest energy consumer. Normalizing bilateral trade relation will enhance bilateral energy trades and vice versa.
The U.S. is now energy independent
Sat, February 19, 2022, 1:30 PM
For decades, politicians have talked about the U.S. achieving energy independence, a seemingly elusive goal of producing enough fuels to avoid relying on the rest of the world to fill up gas tanks and keep electricity flowing.
The intrigue: It’s elusive no more. The U.S. produced more petroleum than it consumed in 2020, and the numbers were essentially in balance in 2021, according to the Energy Information Administration.
Why it matters: The surge in oil prices taking place in 2022 has radically different implications for the U.S. economy — and for key geopolitical relationships in the Middle East and Russia — than in past episodes when energy prices have risen.
The big picture: In the past, when oil prices spiked, the impact on the U.S. economy was straightforward: It made America poorer, as more of our income went overseas to pay for imported energy.
- Now, after the shale gas revolution of the last 15 years, the impact is more subtle. Higher fuel prices disadvantage consumers and energy-intensive industries, yes. But there is a counteracting surge in incomes for domestic energy producers and their workers.
- Higher oil prices no longer depress overall measures of prosperity like GDP and national income, but rather shift it around toward certain regions. Texas and North Dakota win; Massachusetts and North Carolina lose.
By the numbers: As recently as 2010, America imported 9.4 million barrels a day of oil more than it exported. That had swung to a 650,000 barrel per day surplus in 2020, and preliminary numbers for 2021 show trade pretty much in balance last year.
Worth noting: To the degree the U.S. does still import oil, more of it is coming from our closest ally. Canada was the source of 51% of U.S. petroleum imports in the first 10 months of 2021, compared with 8% from the Persian Gulf.
- By contrast, the Gulf states supplied more than 30% of American petroleum imports in 2008.
Free idea for an international relations professor: Assign an essay question on how the changing economics of energy could affect America’s stance in Middle Eastern diplomacy.
The impact on geopolitics extends to a potential Russian invasion of Ukraine. Disruptions to European energy supplies would have a less direct effect on the U.S. than they might have in an earlier era.
The bottom line: When oil prices spike, it’s no longer a problem for overall growth—but because energy is a global market, it still means pain for American consumers and the sitting administration.
Editor’s note: This screen originally published on Feb. 17.