A New Instrument of World Power

Not long ago it seemed as if disparate global events—everything from wars and revolutions in the oil-rich Middle East, to Hurricane Katrina and the Deepwater Horizon oil spill, to the mischievous behavior of Vladimir Putin and Hugo Chavez—were conspiring to drive oil prices into the stratosphere. But today, America is enjoying a happy reversal of fortune on the energy front, as investment, exploration and new technologies have tapped into vast domestic stores of oil and natural gas. This is not a momentary blip or fluctuation. Indeed, America’s reemergence as an energy superpower carries long-term and wide-ranging benefits, especially in the realm of national security and foreign policy.

Just how vast is America’s newfound energy wealth? Here’s a brief tally.

• Geologists call the Rocky Mountain states “the Persian Gulf of gas,” thanks to discoveries of between 165 trillion and 260 trillion cubic-feet of natural gas.

• The U.S. Geological Survey (USGS) estimates that the Arctic holds some 90 billion barrels of oil—about a third of the oil is in Alaskan territory. Another USGS study concludes that North Dakota and Montana hold 3 to 4.3 billion barrels of recoverable oil.

• British Petroleum estimates a new find in the U.S. swath of the Gulf of Mexico could yield 6 billion barrels, and Chevron has found an oil field off the Louisiana coast with some 15 billion barrels of oil. In fact, the American Petroleum Institute (API) reports that opening up new offshore areas in the outer continental shelf could “add about 3.5 million barrels of oil equivalent per day to domestic energy production.”

• All told, the National Petroleum Council pegs America’s conventional oil reserves at 274 billion barrels. That’s a lot of oil—even for a country that consumes 20 million barrels a day. These conventional reserves alone translate into 37.5 years of oil.

• But conventional reserves are just a tiny part of the picture. Until recently, oil supplies were limited to sources derived from traditional drilling. But that’s changing. As the price of oil has increased, the cost of extracting and converting less-conventional sources of hydrocarbon energy into petroleum has become more economical for developers. That brings us to the ocean of oil-shale and oil-sands deposits in North America. The Government Accountability Office (GAO) reports that oil-shale deposits in Colorado, Utah and Wyoming “contain up to 3 trillion barrels of oil, half of which may be recoverable.” As RAND’s James Bartis has observed, “We’ve got more oil in this very compact area than the entire Middle East.” As to the oil-sands deposits, Utah alone holds between 12 and 19 billion barrels in its oil-sands.

Given these largely-untouched reserves, one oil economist recently quipped that the United States may need to join OPEC. What’s more likely is that the United States and its neighbors may soon break OPEC. Noting that U.S., Canadian and Mexican oil production could soon increase by 11.2 million barrels per day, global commodities expert Ed Morse concludes, “North America is becoming the new Middle East.”

As API’s Erik Milito testified to Congress, the United States is producing 50 percent more oil today than in 2008. Soon, perhaps by the end of this year, the U.S. will become the world’s top oil producer—and a net oil exporter by 2030.

According to API, taking full advantage of domestic oil reserves could decrease foreign oil imports by 79.7 percent. Yet the goal of building a thriving North American energy sector would not be autarky, but rather independence and security from reliance on undependable, unsavory suppliers.

The national-security and foreign-policy implications of this great reversal are breathtaking.

As we learned during the embargo of 1973-74, and continue to be reminded today, energy can be used as a weapon. When Venezuela wants to get Washington’s attention, it threatens to sell its oil to China, uses oil wealth to prop up other regional troublemakers and purchases Russian weapons. When Iran wants to challenge the U.S., it threatens to close the Strait of Hormuz, bankrolls Syria and Hezbollah and anti-U.S. insurgents, and diverts its petro-dollars to nuclear-weapons development. When Putin wants to make a point, he shuts off natural-gas supplies outbound for Europe.

An extra 11 million barrels of oil per day—all produced in North America—will send a signal to the global oil market, enable the law of supply and demand to drive the price of oil and gasoline down, deprive these and other unsavory regimes of revenue and power, and rearrange America’s national-security priorities.

Indeed, the security costs associated with maintaining the energy status quo have been enormous for America. Dependence on Middle Eastern oil has forced the United States to prop up regimes that flout American values (Saudi Arabia); to avoid directly challenging them (Iran); and to go to war for them (Kuwait) or against them (Iraq).

Moreover, the near- and long-term security risks associated with the energy status quo are troubling: The Arab Spring revolutions have raised questions about the ability of Kuwait, Saudi Arabia and other petro-powers to weather the storm. Leaked diplomatic cables suggest that Saudi reserves may be overstated by as much as 40 percent. Nigeria—which accounts for 8 percent of U.S. oil imports—is being dismembered by a jihadist insurgency. And with 50 percent of Russia’s federal budget dependent upon revenues from oil and natural gas, high energy prices have enabled Putin to increase military spending 108 percent since 2004—and have led him to make outlandish claims on, and provocative lunges at, energy-rich parts of the Arctic.

However, as Joint Chiefs Chairman Gen. Martin Dempsey observes, “an energy-independent” America “has the potential to change the security environment around the world.” He calls on policymakers to view “energy as an instrument of national power.” Wielding this instrument will have a profound and positive effect on America’s national-security posture:

• North America’s reemergence as an energy superpower is already allowing Washington to recalibrate America’s relationship with the Middle East from that of pusher and user—each dependent on the other just to make it through another day—to a more-normalized state.

• Looking ahead, pumping more U.S. oil into the global market will weaken Russia’s one-dimensional economy and deprive the Russian military of resources. “If we increase our supply of oil, especially into Eastern Europe,” Dempsey contends, “we will dent Russia’s leverage on other countries and reduce the revenues that fund Russia’s aggression.”

• China recently became the world’s largest net importer of oil. Imports account for 60 percent of China’s oil, and that figure is rapidly rising, even as U.S. reliance on non-North American oil falls. China depends on Saudi Arabia, Iraq, Iran, Russia, Angola and Venezuela—all at risk of revolution, instability or outright collapse—for 64 percent of its oil. So perhaps the years ahead will see an energy-starved China forced to expend its wealth protecting, propping up and bailing out oil-cartel regimes.

• Finally, newfound energy reserves inside the U.S. are making America more prosperous. In 2012, for instance, the U.S. energy boom added $283 billion to U.S. GDP, along with some $75 billion to federal and state revenue coffers, as Business Week reports. As these numbers rise, Washington will have the fiscal flexibility to reverse sequestration’s disastrous cuts and make smart investments in defense.

“We are blessed with abundant and diverse energy resources that are unmatched anywhere else in the world,” concludes Gen. James Jones (U.S. Army RET), former national security advisor to President Obama. “What we do with this abundance and diversity will have geostrategic consequences that we are just now beginning to comprehend.”