AMERICA IS A LAND OF PIONEERS…
1. THE GREATEST ENERGY POTENTIAL OF ANY COUNTRY ON EARTH.
America is the land of pioneers, and this experience has also shaped the American energy industry. These first pioneers had found a country that was largely unspoiled. Furthermore, the United States was a land wide-open for settlement, with rich energy reserves, while the energy reserves of the European continent, especially those of England, were being exhausted by early industrialization.
In the United States, industrialization began around the same time as in Germany and gained considerable momentum around the year 1890. The energy reserves of the United States were still largely untouched in the late 19th century, and the exploitation of oil deposits took place mostly in Central Asia, Azerbaijan in particular, where Rockefeller began his career in the oil industry. We have to keep in mind that the United States is a country shaped by its vastness, and only through the presence of the gigantic energy reservoirs has it been possible to advance the expansion of the American economy.
2. AN INEXHAUSTIBLE SUPPLY OF ENERGY.
Just as the seemingly inexhaustible coal deposits of England and Wales favored the technical and economic progress of the British Empire, we find similar developments on the American continent. The USA became the second pole of industrial activity on the planet, thanks to the enormous oil and gas deposits in New Jersey and Texas. However, the rise of the American economy implied the growth of monopolists such as Standard Oil.
Big is beautiful was the name of the game. England had coal deposits at that time, and the oil and gas reserves of the North Sea had not yet been discovered and the technology to exploit them had not yet been invented. In comparison, the United States was in an enviable position due to the simultaneous availability of oil, gas and coal resources. This led American politicians to believe that energy was an inexhaustible resource, because it was at that time. Already in the 1960s, the European continent was confronted with dwindling energy reserves. Europe had only limited energy reserves and looked to Russia and the United States for energy supplies.
3. THE UNITED STATES INUNDATED BY ENERGY SUPPLIES
In the United States, significant oil deposits have been discovered in California. This is in stark contrast to the European experience. Some Californian oil fields are still in operation today. Oil deposits in the northeastern United States are by and large no longer contributing to the energy security of the United States. Production began to spiral upwards. The United States pushed into conventional oil production. The nation lifted its extensive tight-oil reserves in the years that followed. A significant portion of the supplies was subsequently accounted for by the oil and gas deposits in Texas.
There is a very high demand for energy in the US. Oil is needed for a variety of activities in the national economy.
More and more oil was needed. The oil reserves in neighboring Mexico were also being tapped. This has contributed to the security of energy supplies in North America. Alaska’s oil and gas production did not become a serious issue until the 1980’s, but the purchase of Alaska by the United States proved to be an excellent deal for the still young United States. In the course of the 1990’s, interest in oil production in the Gulf of Mexico also increased, and pressure on Venezuela increased steadily, as there was great interest in liberalizing the Venezuelan oil market and opening it to long-term investment.
It was not until the new millennium that Canada’s oil reserves gained in importance, the so-called oil sands, which are characterized by their low energy return. This means that the energy produced from the oil sand is often less than the energy needed for the production and processing of the oil sand. Nevertheless, Canada’s energy reserves also support the domestic oil and gas market in the United States, and a number of pipelines have been built not only from Alaska to the northwest of the United States, but also from Canada to the United States. So Canada and Mexico became energy exporters, of course one has to take into account that both countries are also part of NAFTA.
4. A GLOBAL DOMINION OF ENERGY
As the U.S. economy grew, so did the hunger for energy. Because economic growth, until very recently, was also linked to growth in energy consumption, it seemed only logical that the fossil energy sources of the United States would also run out in time. Very early on the United States showed an interest in controlling locally available energy sources of the Middle East, and already in the 1940’s, when the British Empire was decaying in the Middle East, Americans used this opportunity to enter into a strategic relationship with Saudi Arabia that still persists to this day. Thus the political, economic, military and geostrategic interests of the United States coincide completely.
The United States government rightly assumed that control over energy reserves goes hand in hand with the military power of a state. But we cannot accuse the United States government of exercising its power arbitrarily. Rather, it was about the cohesion of the postwar order, which was threatened by a power vacuum in the Middle East. Energy history has thus shaped the Gulf region. Saudi Arabia is of course the main player on the global oil markets and has played an important role as a hydrocarbon hub for more than 70 years. Qatar’s enormous natural gas reserves also play a key role. Iran is also a crucial part of the global energy landscape.
It seems pretty clear that the United States was going to dominate this region militarily, to keep the peace and facilitate global energy trade. So a geopolitical alliance was needed urgently, and America’s allies excercised power locally, because the United States itself was limited to controlling sea and trade routes, for which it would need abundant energy. We have to keep in mind that at that time it was difficult to transport oil and gas over such long distances.
Through its own domestic oil reserves, as well as access to and control over Middle Eastern oil and gas reserves, the United States is able to exercise an extraordinary degree of control over global energy markets.
5. SUMMARY: WHAT IS THE FUTURE OF U.S. ENERGY POLICY?
This is really not a simple question. Renewable energy generation is highly dependent on location. The United States is no exception, although it has many characteristics that make it an ideal location for the continued growth of renewable energy technology. Conditions are much better in the United States compared to the European Union, with the possible exception of wind energy in the northwest of the European peninsula.
Renewable energy technologies rely on complex infrastructure to make these projects worthwhile. This includes utility services, especially electricity and gas grids. The best locations for renewable energy generation are off the main transportation routes, further away from urban centers and industrial sites where electricity is needed most. Transmission is not only costly in financial terms, it also causes significant electricity losses en route to the end user.
The permitting process and siting are extensive and require many man-hours to meet all requirements. Logistics, supply chain management, production, financing and civil engineering are all extensive. Each step requires special expertise that must be brought in. Talent for this type of project must be built up. This takes many years. Large-scale industrial manufacturing and process engineering processes are required to build these plants.
The talent pipeline needs to be maintained. Qualifications will need to be updated regularly to meet changing requirements. Most talent will come from other subsectors.
The United States is in a fairly unique situation in that it has extensive hydrocarbon reserves while drawing on its solar, wind, and biomass potential. In some locations, geothermal and hydropower offer opportunities for further growth in the renewable energy sector. Overall, the conditions are excellent.
We have written about this particular topic in the past and, of course, invite readers to visit our website to learn more.
In terms of renewable energy sources, we have focused primarily on offshore wind. The potential for further growth of offshore wind in the northeastern United States could rival, or in some cases exceed, the potential in the United Kingdom. This may or may not mean that renewables will fuel further growth in the U.S. economy. This may also depend on cheap energy, energy that is available almost everywhere and is environmentally friendly.
Daniel Poneman, American Energy Policy, 2017, available at: https://www.belfercenter.org/sites/default/files/files/publication/Poneman%20American%20Energy%20Policy_0.pdf
U.S. Energy Information Administration, Oil and petroleum products explained, Use of oil, September 2020, Available at: https://www.eia.gov/energyexplained/oil-and-petroleum-products/use-of-oil.php