US seeks energy 'dominance.' But is that a shield against geopolitical risks?

For decades, haunted by fears of oil shortages, the United States made “energy independence” its goal. Today, with the nation poised to become the biggest oil and gas producer in the world, the administration has declared a new and bolder ambition: “energy dominance.”

What that means exactly is still unclear. But if Washington hopes to use its new hydrocarbon bounty to throw its weight around in the world it will be disappointed, say energy experts.

“There seems to be a desire to use energy as a geopolitical tool more aggressively,” suggests Meghan O’Sullivan, author of “Windfall,” a book about the blessings that America’s energy abundance has brought. “But global markets have a much bigger impact on geopolitics than policymakers do.”

BIG SHIFTS IN ENERGY MARKETS

US deposits of shale oil and gas, newly reachable through fracking, have profoundly transformed those markets.

Last November, US wells gushed more than 10 million barrels of crude a day, their highest rate in nearly half a century. The nation already pumps more gas than Russia and more oil than Saudi Arabia (though not as much as Russia). Last month the head of the International Energy Agency, Fatih Birol, said he expects the United States to become the “undisputed leader” of global oil and gas production for “years to come.”

But that doesn’t necessarily translate into “dominance” of the international market. America’s new energy prominence does bolster the image of America as an economic powerhouse, countering talk of US decline in the face of new geopolitical rivals; but it is not sufficient to make the country the swing producer that OPEC once was.

In 1980 the US produced about 24 percent of all the energy consumed in the world. In 2016, that proportion was down to 15 percent, because worldwide supply and demand had risen so much. By 2040, according to official US government predictions, the share will be lower still, at around 13 percent.

And because the United States is the biggest consumer of oil in the world, it does not export anything like as much as Saudi Arabia or Russia. In fact the US currently meets less than 5 percent of non-US global demand for crude oil.

“Don’t expect international dominance to materialize,” cautions Daniel Raimi, an energy expert at the University of Michigan in Ann Arbor.

There is no doubt that America’s bountiful supplies of oil and gas have brought enormous benefits. Cheap oil has meant higher economic growth, more jobs, richer tax revenues, and increased international competitiveness.

THE IMPACT FROM IRAN TO EASTERN EUROPE

The oil and gas boom has also countered a spreading international narrative about “the decline of America,” says Sarah Ladislaw, an energy analyst at the Center for Strategic and International Studies, a Washington-based think tank. “It readjusts how people look at the United States and its capabilities.”

The way in which US production has eased the international oil market has certainly altered the geopolitical scenery. The abundance of oil, for example, made it easier to organize an international oil embargo against Iran to persuade it to halt its nuclear weapons program. The world could do without Iranian oil.

And the fact that the US now exports natural gas makes it a potential player in Eastern Europe, where some countries now depend heavily on Russian gas. The first US tankers of liquefied natural gas (LNG) docked at Polish and Lithuanian terminals last year, and more will follow.

“That won’t eliminate Europe’s need for Russian gas, but it offers flexibility and the chance to argue over price,” says Mr. Raimi.

But the idea that Washington might liberate Europe from its market ties to Moscow is illusory. Firstly, the quantities of US gas flowing to Europe are still small; there is still only one LNG export terminal in the lower 48 states, though seven more are planned.

Secondly, Russian piped gas is cheaper than American LNG, which needs to be liquefied, shipped and re-gasified before it can be used. “It’s markets that decide where energy flows go, not politicians,” says Professor O’Sullivan. “No company will send gas to Europe just because of [US] policy.”

And markets are neutral: Though the low price of oil and gas – brought down by prolific US production – hurts US rival Russia, which is a major energy exporter, by the same token it benefits another country challenging US power, China, which is a major energy importer.