American Energy Policy

AMERICA IS A LAND OF PIONEERS…

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.


AN INEXHAUSTIBLE SUPPLY OF ENERGY

Just as the seemingly inexhaustible deposits of England and Wales favored the technical and economic progress of the British Empire, we find that similar developments took place on the American continent as well, which became the second pole of industrial activity globally, through its enormous oil and gas resources. 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 reserves at that time, and the North Sea’s oil and gas reserves were not yet discovered and the technology to exploit it not yet invented. The United States, by comparison, was in an enviable position due to the simultaneous availability of oil, gas and coal resources. This led American politicians to believe that energy is an inexhaustible commodity, because at that time it was. Back in the 1960’s, the European continent already faced declining energy reserves. Europe had  little in terms of energy reserves, and was looking to Russia and the United States for energy supplies.


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.


A GLOBAL DOMINION

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 assumed quite correctly that control of energy reserves goes hand in hand with the military power of a state. Though we cannot accuse the government of the United States that it arbitrarily excercised power, but rather it was about the cohesion of the post-war order which was endangered by a power vacuum in the Middle East. After all, countries like Saudi Arabia, Qatar and Iran possess significant oil reserves.

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, access and control of Middle Eastern oil and gas reserves, the United States is capable of exercising an extraordinary degree of control over global energy markets.


References:

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

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