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WALD: Foreign hands grasp the oil spigot
While the U.S. seeks independence, overseas powers buy up result
Question of the Day
The United States aspires to achieve energy independence — a goal whose worth is compounded by the freedom that reliance on solely North American sources of energy would bring from the quagmire of Middle East politics and oil.
However, new investments by the Middle East in U.S. energy indicate that even if America could eventually rely on domestically produced energy, Middle Eastern companies intend to maintain a foothold in the American energy production and everything else that it entails.
The United States was once the largest producer of oil in the world in the 1930s. American oil and coal production fueled both the Allied victory in World War II and domestic growth in the 1950s. Large American companies like Exxon Mobil, Chevron and Getty not only extracted and refined domestic oil, but also made substantial investments in overseas oil reserves in the Middle East and South America.
While American oil companies have remained dominant worldwide — Exxon Mobil, for example, recently regained its position as the largest company by market capitalization — we now see what may be the start of a reverse relationship. Middle Eastern companies are beginning to exploit North American resources.
Today, the largest oil refinery in the United States, Motiva in Texas, is owned by Saudi Aramco (a state-owned company) and Royal Dutch Shell (a British and Dutch company). The refinery recently completed a major expansion project, originally driven by growing American demand for Saudi oil in 2007.
Since the expansion began, however, U.S. demand for oil has fallen and production of North American oil has risen. Saudi Aramco has, therefore, repositioned Motiva to accept this change in the market. In addition to importing Saudi oil, the Motiva expansion allows Saudi Aramco to refine and export petroleum products to Latin American markets. Most important, though, the expansion enables Saudi Aramco to refine the heavy crude oils now being extracted from Canadian and American oil sands and shale fields. For example, should the Obama administration approve the Keystone XL pipeline, it would deliver this North American crude oil directly to the refinery's location in Port Arthur.
Saudi Aramco's hold on American refining is now substantial, as half of America's refineries have been closed since 1980 with no new refineries built since 1976. Saudi Aramco acquired half-ownership of the Motiva refinery in 2002 and completed its expansion this year, which positions it to become the leading refiner of petroleum products in the United States. Saudi Aramco's Motiva profits will likely not remain in the United States, but go to the kingdom's coffers to be used to benefit Saudi causes and wealth. This refinery and future investments ensure the Saudis will keep its hand on the proverbial "oil spigot."
Qatar is also positioned to extract significant profits from the American energy industry. According to the U.S. Energy Information Administration, Qatar holds the third-largest natural-gas reserve in the world and has been the world leader in liquefied natural-gas technology and exportation since 1997. Yet Qatar Petroleum International (also a state-owned company) owns a 70 percent stake in the Golden Pass re-gasification terminal in Texas. The terminal was previously intended to import Qatar's natural gas into the United States, but with the boom in North American natural gas, Qatar is now seeking to repurpose the facility to export liquefied natural gas and profit from North American resources. Qatar Petroleum International's CEO, Nasser al-Jaidah, recently stated that the company is seeking to invest in North American shale, a highly touted source of America's potential energy independence, and on April 15, the company acquired a stake in Suncor Energy's natural-gas holdings in Canada.
All of this may be the inevitable result of developing countries seeking to diversify in the global marketplace. However, that does not negate the strategic and economic impacts to the United States and North America. Though some may dismiss this concern as alarmist, they should recall the disastrous effects of the OPEC oil shocks in 1974 as one example of how the United States has been affected by continued reliance on foreign energy companies and the whims of their governments.
In the 1950s, the Truman administration saw strategic benefits in American companies holding foreign oil resources, both for military and economic reasons. They considered this a key component to ensuring American energy independence as a global power, and their policies led to energy security. As the United States aims to regain this security, we should realize that the same countries whose energy we are now trying to swear off have a growing hand in the extraction, production and distribution of our own energy resources at home.
Ellen R. Wald is an energy historian and visiting assistant professor at the University of Georgia.
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