American Energy Policy



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, on the other hand, significant oil deposits have been discovered in California, some of which are still being exploited today, and oil deposits in the northeast of the United States, which are no longer contributing on a large scale to the energy security of the United States. From then on, production sources began to multiply, and a significant portion of the supplies was subsequently accounted for by the oil and gas deposits in Texas.

At that time, the oil reserves in neighboring Mexico were also being tapped, some of which 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. REFERENCES


Daniel Poneman, American Energy Policy, 2017, available at: https://www.belfercenter.org/sites/default/files/files/publication/Poneman%20American%20Energy%20Policy_0.pdf


Many thanks for the shared interest in the energy world!



Disclaimer:


This article is just meant to inform the reader of recent developments in the energy industry at large and to share knowledge and insights with a wider audience. The author does not put forth investment recommendations. This article should not be taken as investment advice and the author cannot be held to account for investments made. For more information, please refer to the Legal Disclosure and Privacy Policy, which you can click on or find at the top of this page in the menu bar. 


Contact us!