US House panel examines improved US resource position, geopolitics

May 23, 2018
A dramatically improved US oil and gas resources outlook in the last 10 years has created important geopolitical and trade opportunities while making the country more secure in energy and economic terms, witnesses told a US House Foreign Affairs subcommittee on May 22.

A dramatically improved US oil and gas resources outlook in the last 10 years has created important geopolitical and trade opportunities while making the country more secure in energy and economic terms, witnesses told a US House Foreign Affairs subcommittee on May 22.

They also said it will be essential to keep transportation systems reliable if the US expects to compete for long in global energy markets.

“Upstream innovations have shifted the competitive landscape in global oil and gas markets to the point where now the US is a growing supplier,” observed Kenneth B. Medlock III, senior director at the Center for Energy Studies at Rice University’s Baker Institute for Public Policy.

“This has been propelled by a robust, technically and commercially recoverable resource endowment in the US and the unique set of regulatory and market institutions that have promoted commercial development of infrastructure,” Medlock said in a written statement accompanying testimony before the Terrorism, Non-Proliferation, and Trade Subcommittee.

The two factors have improved US energy security markedly and carry global competitive advantages for US oil and gas suppliers that will become more important if emerging markets in Asian developing countries over the next 20-30 years are considered, Medlock said.

“The sheer collective size of these markets—over 3 billion people in economies projected to grow in excess of 5%/year—will put steady pressure on supply lines for all fuels, meaning the US with its relative abundance of oil and gas is well-positioned to play an important role in shaping energy geopolitics for the next few decades,” Medlock said.

US policymakers should realize that other influences could cloud this optimistic outlook, other witnesses warned. “We must remember that the US is a major oil and gas consumer as well. Particularly for oil, our energy security depends on a global market with prices set based on global conditions,” said Samantha Gross, a fellow at the Brookings Institution’s Cross-Brookings Initiative on Energy and Climate.

“Supply disruptions do not only happen abroad. Hurricanes and floods have brought about large disruptions in domestic energy supply,” Gross said. “Our interconnections with the world are key to our energy security—a source of strength and resilience, rather than weakness.”

A third witness, Sarah Ladislaw, director and senior fellow at the Center for Strategic and International Studies’ Energy and National Security Program, told the subcommittee that the US is more engaged now in global oil trade on a gross basis than ever. “This means the US economy continues to experience the impact of oil price changes, just in increasingly complex ways,” she said. “In addition to price shocks, the US is still vulnerable to oil and gas supply disruptions.”

Even the abundant US oil and gas supplies are not a direct proxy for security since delivery systems are needed to get resources from the production to consumption points, Ladislaw said.

“Logistical bottlenecks in pipeline contracting, sighting, permitting, and construction continues to impede rapidly growing oil and gas production in the Permian basin in Texas from reaching end markets,” she said. “While this bottleneck is temporary, it once again illustrates the strategic importance of midstream and delivery infrastructure towards realizing these resources’ full commercial and strategic value.”

A fourth witness said that gas technology breakthroughs have given the US opportunities to be more competitive globally, create domestic jobs, save consumers money, and engage more broadly in global trade. “Sustaining our progress will require continued investments in research to enhance well productivity, reduce costs and minimize the overall environmental impacts of production, transportation and use,” noted Gas Technology Institute Chief Executive David C. Carroll.

“We also need continued investments in pipeline infrastructure to get this affordable, cleaner energy to market,” Carroll said.

“America’s comeback as an energy superpower has wide-ranging geopolitical implications,” Subcommittee Chairman Ted Poe (R-Tex.) said. “First, it is an obvious benefit for Americans and the US economy, reducing our trade balance and creating new well-paying jobs. In turn, this generates more revenue making us an even stronger nation.”

Poe said the improved US energy outlook also means “a lot less money is going to repressive regimes around the world we previously depended on for oil.” He said, “And since energy is more abundant, the price of oil is decreasing. Overall the result is less money for [Vladimir E.] Putin’s Russia, the Ayatollah’s Iran, and [Nicolas] Maduro’s Venezuela.”

US Rep. Bill Keating (D-Mass.), the subcommittee’s ranking minority member, agreed that more abundant US oil and gas supplies have increased the nation’s energy and economic security. But he also warned in his opening statement that improved trade opportunities overseas should not make policymakers ignore global climate change implications.

“In a post-Paris Climate Agreement world, there is a nearly universal agreement to address the impacts of global climate change. Investments in clean energy and renewables will be a big part of that, not just for the US and other countries, but for developing economies as well,” Keating said. “How much will oil and gas be a part of our future energy exports? How big a role will renewable energy play?”

Contact Nick Snow at [email protected].