Energy Politics

Chapter 9. The United States

Chapter 9 The United States Because it is the world’s largest energy consumer and economy, the United States has more impact on global energy trends than any other country. Indeed, not only is the United States the world’s largest energy consumer, it is also the largest energy producer and net importer. The United States possesses the world’s largest coal reserves, sixth-largest natural gas reserves, and eleventh-largest oil reserves. It is also the secondlargest producer of climate-altering gases, and the largest on a per capita basis.1 Energy policy is integrated thoroughly into U.S. foreign and national security policies, and Washington frequently uses energy sanctions and policies as a tool to advance policies. For decades, the United States has approached energy security from a global perspective. In an integrated world oil market, securing supplies for its own market does not grant immunity from the economic costs of high world oil prices. As a global commodity, imported or domestically produced oil costs the same to U.S. consumers. Thus, Washington has traditionally tended to work to bring more oil to world markets, not just to its own shores. In addition, the United States views ensuring reliable energy supplies to its allies as an integral part of security guarantees. Domestic political discussions in recent years have also emphasized energy independence as a factor in energy security, in contrast to the previous approach. In a poll conducted in 2006, Americans described ‘‘energy dependence’’ as their second greatest concern after the war in Iraq.2 Accordingly, President George W. Bush and other officials joined those calling for reduction of oil imports, not just oil use. For example, in his January 2006 State of the Union address, Bush called for reducing oil imports from the Middle East by 75 percent by 2025. In his official campaign materials, President Obama called for eliminating oil imports from Venezuela and the Middle East within ten years. Moreover, in candidates’ statements from all parts of the political spectrum in the 2008 U.S. presidential elections, 136 Chapter Nine it seems that the concepts of energy security and energy independence became blurred, despite their questionable connection. The bulk of U.S. oil imports arrive and are processed at installations in states along the shore of the Gulf of Mexico. More than one-third of U.S. oil production comes from the Gulf Coast and the offshore waters between Alabama and Texas, and more than 50 percent of U.S. refining capacity is located in the same region. Hurricanes Katrina and Rita in 2005 illustrated to Washington that not only can global energy supplies be threatened by disruptions in critical producer states and important naval chokepoints, such as the Hormuz and Malacca Straits, but supplies that have reached the Gulf of Mexico are vulnerable to the whims of Mother Nature. Washington has not yet succeeded in providing a policy answer to this vulnerability. Background: U.S. Energy Use Possession of expansive energy resources fueled the development of the U.S. economy during the nineteenth and first half of the twentieth century . Unlike most oil and gas producers today, the United States decided in the nineteenth century that the private sector rather than the government should own natural resource commodities. The central government also established a strong system that upheld property rights over energy resources, which helped attract investments in this sector. More than 80 percent of U.S. reserves are concentrated in four states: Texas (22 percent), Louisiana (20 percent), Alaska (20 percent), and California (18 percent). Oil played a significant role in the economic and social development of these states. The 1970s oil crisis fundamentally changed the way the United States consumes oil. Until the 1970s, oil was an all-purpose fuel. In contrast, today it is primarily a transportation fuel, with 65 percent of consumption used for transportation. Other parts of the economy, especially manufacturing, switched to alternative fuels such as natural gas. U.S. consumers also used technology to increase energy efficiency immensely. Consequently, today the United States uses half the amount of oil per dollar of GDP compared to the 1970s. Since oil is now a less important input to the economy, the United States is able to sustain higher oil prices longer before recession kicks in. This ability to tolerate high oil prices also means that U.S. consumption is less affected by price hikes than in the past, and thus prices are likely to...