Notwithstanding attempts to spin the recent news on Syria in President Obama’s favor, most objective observers argue that it was Vladimir Putin who achieved a significant diplomatic victory for Russia by offering to broker a deal on Syria’s chemical weapons. By calling the president’s bluff, the Russian leader reinserted his country into the Middle East and essentially shattered U.S. policy there.
This outcome can be attributed to two factors. The first, of course, is the administration’s feckless foreign policy. The second, though, is probably more important: the ability of Mr. Putin to exploit the geopolitics of energy by blackmailing Eastern and Central Europe, which depend on Moscow to supply much of their energy needs.
It is time for the United States to also play this game and play it with a vengeance. If the adminstration permits it, America will be able to change the geopolitical balance of energy power in the world, curtailing the ability of the likes of Mr. Putin to cause mischief. The fact is that the United States has effectively played “the great game” of energy geopolitics in the past.
According to a November 2012 report of the International Energy Agency, the United States is set to overtake Saudi Arabia and Russia to become the world’s largest oil producer by 2017. The causes of this momentous shift in the geopolitics of energy are advances in directional drilling and hydraulic fracturing technologies (“fracking”) that have enabled U.S. producers to achieve high rates of gas production from deep shale formations. These methods are also applicable to oil production.
A December 2012 report of the U.S. Energy Information Administration points out that these new technologies allowed the United States to increase crude oil production by 760,000 barrels per day, the largest rise in annual oil output since the middle of the 19th century.
As the 2012 edition of the International Energy Agency’s World Energy Outlook reports, “the extraordinary growth in oil and natural gas output in the United States will mean a sea change in global energy flows.” The result is that the United States will become a net energy exporter in the next few years.
This outcome would provide the United States with substantial geopolitical leverage over the likes of the Middle East and Russia. The latter’s ability to bully Eastern and Central Europe would be substantially reduced.
The problem is that the Obama administration sees hydrocarbons as a greater enemy than the strutting Mr. Putin. The record of this administration does not bode well for taking advantage of the fracking revolution. Its war against fossil fuels is well documented, a war that could strangle the energy revolution before it gets started. The only reason that federal regulators have not been able to dig their claws into fracking is that much of it has taken place on private lands. However, states can limit fracking, as New York has done, even as neighboring Pennsylvania is experiencing an economic boom based on exploitation of the Marcellus shale formation.
The Reagan presidency provides a precedent for using energy as a tool of geopolitics. Taking office in 1981, one of President Reagan’s first steps was to lift the price controls that his predecessor, Jimmy Carter, had imposed on crude oil prices. The “experts”were appalled. President Carter’s “energy czar,” Frank Zarb, predicted that the price of gasoline would soon be $10 per gallon.
Instead, crude oil prices — and the prices of refined product — fell precipitously. Why? Because the price controls on U.S. domestic oil production actually helped OPEC keep crude oil prices high, permitting the cartel to control the output of its members. As long as U.S. price controls were in effect, OPEC’s oil was more valuable in the ground. However, once price controls were lifted, U.S. domestic production increased, placing downward pressure on worldwide crude prices. This broke the discipline within OPEC necessary to ensure cartel cohesion. In order to ensure that their oil did not lose value as it lay untapped in the ground, OPEC members increased production, causing oil prices to plummet.
In similar fashion today, advances in directional drilling and fracking have the potential to change the geopolitical landscape to the benefit of the United States, and its friends and allies. America can do to Mr. Putin what Reagan did to OPEC in the early 1980s. The question is: Will this profound transformation be strangled by the Obama administration’s war on energy?
Mackubin Thomas Owens is editor of Orbis, the quarterly journal of the Foreign Policy Research Institute.