As Iraq plunges into all-out sectarian warfare, oil prices are moving higher. The price of benchmark Brent crude surged above $114 for the first time in nine months. Three quarters of Iraq’s 3 million barrels per day of oil production – the second-largest in OPEC – is located in the country’s south, which is Shia-controlled and not yet in jeopardy. That could change.
At the same time, Russia has cut off Ukraine’s natural gas supply – for the third time since 2006. Like it or not, the U.S. is quickly becoming the essential incremental supplier of oil and natural gas to the world – now sharing that role historically held by Saudi Arabia. Isn’t it time the United States stepped up to maximize our energy output?
As The Financial Times points out in a recent editorial, the so-called “Peak Oil” theory may be dead, but oil abundance is not widespread. Indeed, rising oil output is limited mainly to the U.S. and Canada, while production in the North Sea, Mexico, Venezuela and other regions is dropping. In fact, all the increase in global oil output since 2005 has come from the U.S.
Related: How the Collapse of Iraq Would Affect America
This is an accomplishment you don’t hear much about from the Obama White House. Their friends in the environmental movement would like Americans to think that impending shortages of oil and natural gas excuse huge subsidies and investment in “green” energy. It is not true. While the U.S. does not have the kind of shut-in or reserve production that long allowed Saudi Arabia to keep a lid on oil prices, we will have an important say in future global supplies and costs.
The International Energy Agency reported, “Less than ten years ago, the United States was the world’s largest importer of refined products, with 2.5 million barrels a day (mb/d) of product inflows in 2005. Its crude production seemed inexorably in decline. Today it has become the world’s largest liquids producer, ahead of Saudi Arabia and Russia, as well as its largest product exporter… By the end of the decade, North America as a whole will have achieved energy “independence” and have become a net oil exporter… making it a titan of unprecedented proportions in product markets.”
The IEA recently forecast in its Medium-Term Oil Outlook that the world’s increased oil supplies through 2018 will mainly come from the U.S., Canada, Iraq and Brazil. Brazil’s output is indeed increasing, thanks largely to the expanding role of foreign-owned oil companies that have provided much-needed capital and technical expertise. In March, output of oil and gas ran 13 percent higher than the year-earlier level, and was the second-highest in Brazil’s history. Future prospects for Iraq are clearly cloudier.
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But, it is from the U.S. and Canada that most production growth will come. The IEA reports “It is hard to overstate the degree to which the North American supply boom has, since its onset, consistently defied expectations…” The projection for 2013 output from the two countries is 3.21 mb/d above the forecast made in 2010- an astonishing over-achievement. Unhappily, this upside surprise has been matched by disappointing output elsewhere, so that global oil prices have remained high, and our influence critical.
President Obama needs to wake up to our global energy responsibilities. Instead of intentionally curbing our energy production, the United States should be pushing the “all of the above” strategy that the president has talked about (but never adhered to) in the past. Rather than impose emissions regulations that will cut back coal production, prohibit exports of crude oil, ignore our nuclear industry and continue to block Canada’s exploitation of the world’s largest oil reserves, the Obama White House should wise up. Russia is wielding its natural gas exports as a geopolitical weapon, China is rushing to secure disputed energy sources in its region – why are we alone in undervaluing energy?
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