Business Standard

Roger Cohen: Forget the fiscal cliff - the future still belongs to the United States

Poised to become a net energy exporter, and with a population that will be younger than Europe's or China's, the US is very far from decline

Related News

With the running a huge deficit, the incomes of the “99 per cent” stalled, the approaching fast, the nation’s dependence on external financing from acute, and Washington gridlock a recurrent political condition, this may seem like an odd moment to be bullish on America. But I am.

The main reason is the huge shift already underway in the politics of energy and oil. The change has been underappreciated. It may be summed up in a single sentence buried in the 166-page study* just published by the US National Intelligence Council: “By 2020, the US could emerge as a major energy exporter.”

That is just eight years away and, yes, you read that right, exporter of energy, not importer. According to the US Energy Information Administration, the United States imports around 8 million barrels of crude oil a day, so the predicted turnabout is dramatic. With those imports, notably those from the Middle East, go forms of political dependency and expediency that have long exacted a price on the United States.

Several developments lie behind this looming geostrategic shift. The first is the advent of shale oil and natural gas production made possible by new technologies. The second is the increase in oil production from deep water offshore operations. Between them, by somewhere between 2020 and 2030, these new sources are expected almost to double US domestic oil production, currently running at between six and seven million barrels a day.

Combine that with improved mileage for cars and a switch in trucking to cheap liquefied natural gas and a once unimaginable scenario becomes reality: The United States wipes out its need for oil imports. Eliminating need, of course, does not necessarily mean eliminating imports completely but it does mean a change in American leverage.

“This is a transformative development,” Amy Myers Jaffe, the executive director of energy and sustainability at the University of California Davis, told me. “We see ourselves increasingly as this weakened country dependent on faraway events. But as we become energy independent our sense of our own power and freedom of movement will change — and with it our foreign policy in ways that are hard to predict. Oil is a different issue when it is not your own problem anymore.”

In other words, think of the world before the first oil shock of 1973 to get some notion of what is afoot.

In the Middle East, the equation switches when China becomes more dependent on a steady oil supply and more concerned on an economic basis about the region than the United States.

Right now, as Jaffe noted, China can operate in the knowledge that Middle Eastern instability costs the United States above all. If the Iran problem festers, for example, so be it. But facing a United States that is energy independent, as its own energy needs and costs rise, Beijing may well be prodded into a different strategic assessment.

Moreover, if oil prices fall over time, which seems plausible, the power and leverage of countries including Iran and Saudi Arabia will be diminished.

Several caveats are in order. First, shale oil and gas production depends on hydraulic fracturing, or fracking, whose environmental impact causes public unease. How far this will slow development is unclear.

Second, the power shift from the West toward the emergent powers of Asia over the next couple of decades is inexorable. So energy independence for the United States is not going to alter its need to operate in an interdependent world devoid of any hegemonic power. Third, countries including Saudi Arabia and Venezuela own large refining operations in the United States; oil ties with them are intricate and unlikely to unravel.

Still, the self-image and economic prospects of an energy independent United States are going to see a sharp uptick. As the National Intelligence Council’s study says, “The prospect of significantly lower energy prices will have significant positive ripple effects for the US economy, encouraging companies to take advantage of lower energy prices to locate or relocate to the US.” Already there are significant signs of the relocation of manufacturing industry to the United States, drawn in part by cheap energy. The council estimates as many as 3 million jobs added by 2030.

Jaffe, who recently moved from Texas to California, has noticed another important trend: the rapid coming-together of what she called “App world and the energy world.” This fusion is creating, through innovative technologies, tremendous possibilities in energy saving. Chevron, headquartered in California, has already developed a big energy efficiency business precisely through this symbiosis.

So, if you need consoling, look beyond the cliff a few years to an energy independent United States whose capacity for reinvention is far from exhausted. If that is not enough to lift the clouds, ponder demographic trends. The predicted median age in the United States in 2030 is 39 — against 43 in China, 44 in Russia, 49 in Germany and 52 in Japan.

More people of working age using cheaper energy equals Advantage USA.


 

©2012 The New York Times News Service
*http://globaltrends2030.files.wordpress.com/2012/11/global-trends-2030-november2012.pdf  

Read more on:   
|
|
|
|
|
|
|

Read More

Devangshu Datta: Expect the unexpected

The market continued to mark time as the last settlement of 2012 passed by. There was negligible change in net index levels. Most traders are ...

Most Popular Columns

Premvir Das

Premvir Das: Arihant and what it means
Premvir Das

India's first indigenous nuclear-powered submarine is a considerable achievement - and should have an impact on security strategy

Nitin Pai

Nitin Pai: Mr Modi's follow-through risks
Nitin Pai

For India to make the most of Narendra Modi's ambition and energy, he must get New Delhi to keep up

Abheek Barua & Bidisha Ganguly

Abheek Barua & Bidisha Ganguly: A glimpse of things to come
Abheek Barua & Bidisha Ganguly

The rise in US interest rates and associated change in the direction of capital flows, the fall in oil prices and the slowdown in China are three themes that will dominate the markets in 2015

Advertisement

Columnists

Ajai Shukla

Ajai Shukla: Of dogs' tails and leopards' spots
Ajai Shukla

Few Indians believe that Pakistan's war on terror would extend to Punjab-based Lashkar-e-Toiba

Shailesh Dobhal

Shailesh Dobhal: The digital year
Shailesh Dobhal

India Inc will remember 2014 as the year when the threat and the opportunity of the digital world became real

Arunabha Ghosh & Abhishek Jain

Arunabha Ghosh & Abhishek Jain: A Rs 12,000-crore year-end gift
Arunabha Ghosh & Abhishek Jain

How could India increase access to modern cooking energy for millions of under-served citizens while maintaining fiscal discipline? There has ...

Back to Top