Only time will tell whether OPEC will effectively implement its recent decision to curb oil supplies and reverse a price slump that’s persisted for 2½ years.
But amid the many prognostications over oil prices, something else is clear: When it comes to energy security, the U.S. is in a much better position today than it has been in years.
Carlos Pascual, a top energy official at the State Department early in the Obama administration and once an ambassador to Ukraine and Mexico, offered a reminder the other day that the resurgence in U.S. oil and natural gas production in recent years has given Washington more discretion in dealing with Saudi Arabia and other members of OPEC, not to mention Russia and other countries.
When it comes to oil, “the capacity to have a dialogue and to have a discussion as equals, and not as an importer speaking to an exporter, changes the nature of the relationship and the dynamics around the issues that you can address,” Pascual, a senior vice president with the analysis firm IHS, said on the Columbia Energy Exchange podcast last week.
Due to technologies that make development of shale reserves profitable, the U.S. is producing more oil than it has in decades and record levels of natural gas, though low prices have cut into oil output this year.
Moreover, Congress lifted restrictions on crude oil exports last December, opening overseas markets to U.S. producers, just as the first shipments of liquefied natural gas from the continental U.S. began.
“There was a point in time — I remember clearly from my experience in the 1990s in engaging Russia — that the principal focus around the energy discussions with Russia was how to … encourage (Russian) production of hydrocarbons because the world needed them,” Pascual told Jason Bordoff, the director of the Colombia University Center on Global Energy Policy, which produces the podcast.
(Full disclosure: I also host some Columbia Energy Exchange podcasts.)
Now, regarding oil, “we’re not approaching the relationship with Russia from that perspective. We don’t need to approach the relationship with Saudi Arabia from that perspective. We’re a major player and a major producer. We both have common interests.”
Or put another way, he added, the U.S. is no longer “a supplicant” for oil when it comes to its relationship with Moscow or Riyadh.
The impact of that energy revival in the U.S. is evident in oil, where shale production has made it difficult for OPEC to control markets as it once did, and in gas, where U.S. exports bolster global supplies, providing Europe and other regions with alternatives to Russian gas.
“Clearly, markets are going to drive where those resources go, and they should drive where those resources go,” Pascual said. “But our participation in the market is going to have an impact on other countries.”
That will be an important consideration for the incoming Trump administration, as it sorts out U.S. relationships with Russia, Saudi Arabia and other countries, and decides how best to use its influence on a whole range of issues.
“Energy is absolutely critical to the future of international politics, international economics, international climate issues,” Pascual said. “And understanding how to manage the interests and the diplomatic capabilities of the United States to advance those interests in the energy world is key.”
Bill Loveless — @bill_loveless on Twitter — is a veteran energy journalist and podcast host in Washington. He is the former anchor of the TV program Platts Energy Week.