How Obama Missed The Biggest Gift To American Energy Independence In History
American energy independence will ultimately have a profound impact on world political developments. It’s too late to be Obama’s legacy, but it could become Trump’s.
The most revolutionary change in modern energy markets has arguably been the growth in the extraction of shale gas and oil over the past decade. It has given the United States a tremendous opportunity to refashion energy and foreign policy. For the last eight years, that was an opportunity missed by President Barack Obama. Captivated by the Democrats’ green wing, Obama leaves office having failed to embrace a fossil fuel renaissance that could have helped him achieve the very goals he tried — and fell short of — achieving in the Middle East.
Certainly the United States still benefited hugely from the expansion of new fracking and horizontal-drilling technologies. Historically a large net importer of oil and gas, the ramp-up in oil and gas production enabled it to reduce its dependency on supply from unstable nations. Unlike solar, wind and electric cars, none of this required governments to dole out subsidies or impose tariffs and regulations to protect an “infant industry.”
Strictly based on the merits and economics of new technologies, businesses figured out a new way of extracting trillions of cubic feet of natural gas and billions of new barrels of oil. Natural gas production increased by 50 per cent from 2007 to 2015; oil and liquids production by almost 80 per cent.
With Canada and Mexico, North America is now a net exporter of natural gas, a tremendous shift from earlier years. Instead of plants being built to import LNG, more are now needed for exports. Within a decade, North America could also be a net exporter of oil for the first time in decades; with the North American petroleum supply at 22.2-million barrels per day and petroleum demand at 24.9-million barrels per day, the continent will soon reverse its supply-and-demand balance.
Instead of celebrating the rise of American energy independence, Obama fixated on greenhouse-gas emissions. The shale-production explosion in the United States is a mixed bag for Obama’s low-carbon legacy. On one hand, the sudden glut of natural gas drove down prices, prompting a major shift in American electricity markets away from coal to lower-emission, lower-polluting natural gas. A decade-and-a-half ago, coal powered roughly half of all U.S. electricity, and natural gas less than a fifth. Today, coal and natural gas each count for a third.
On the other hand, Americans are consuming more gasoline and buying more fuel-guzzling SUVs, pick-ups and crossovers than ever, after the boom in U.S. oil production triggered a collapse in global oil prices.
If Obama was determined to get tough on greenhouse gases, he could have tried to stamp out the oil and gas boom that took hold during his presidency, like limiting production or saddling producers with new taxes (see: Alberta’s NDP government). Instead, he opted for symbolism, banning pipelines like Keystone XL, which did nothing to help reduce emissions, or banning drilling in places where there currently is none.
So while Obama was at least disinclined to block America’s oil and gas renaissance, his ambivalence about it left him unwilling to fully reap its benefits. Instead of pointlessly blocking pipelines like Keystone XL and Dakota Access, Obama could have devoted his own energy over two terms to helping to build an even better, more integrated, and more independent North American energy network. With that, he might have been able to better defend his legacy in other ways.
Specifically, greater energy independence could have only helped his attempt to disengage the U.S. from the Middle East, a most radical foreign policy shift after decades of American leadership following the decline of the British Empire. Under Obama, America essentially withdrew from Iraq and Afghanistan. Its military followed, rather than led in Libya. It stayed out of the Syrian war. It did little to combat ISIL, leaving the battle, and the subsequent power vacuums, to Iran and Russia. Obama also dropped America’s gloves in the fight against Iran’s nuclear ambitions, ending sanctions and transferring billions in cash to Tehran.
What the president missed was that the shale revolution was the most important gift in providing the U.S. a chance to shift priorities away from the Middle East and pivot to Asia. Of course the sharp increase in oil and gas production has enabled the United States to lessen its dependency on world markets anyway, relying more on supply from allies like Canada and Mexico. But a North American network would have come along much further had it not been for Obama unnecessarily blocking Canadian oil imports.
Perhaps, President-elect Donald Trump has already figured this out. He plans to unleash oil and gas development in the U.S., and approve both Keystone XL and Dakota Access. He appears set to welcome Canadian oil as a substitute for Middle Eastern oil, rather than discourage it.