US Does Have A Weapon Vs. Putin: Energy
Just the promise of U.S. pressure on Putin’s quasi-monopoly on energy might make him treat his customers better
Is it true that the U.S. has few real options to pressure Vladimir Putin to get out of Ukraine? How about a straight business statement from Washington like this:
“We are delighted to announce that the U.S. is accelerating its plans to export natural gas and will soon reverse our virtual ban on oil exports. We have such abundant, new supplies of gas and oil in America that we look forward to becoming a major supplier to world markets. And the first customers we aim to serve are our good friends in Europe.”
To date, America’s debate over what to do with its sudden wealth of energy has been about business, economics and the environment—not about securing U.S. interests abroad. Companies like Exxon Mobil, ConocoPhillips and Royal Dutch Shell want to ease restrictions on oil exports, which were put in place after supply volatility in the 1970s. There’s money to be made feeding world markets from fields such as the Bakken in North Dakota and Eagle Ford in Texas.
Similarly, a range of U.S. companies want to build pipelines and liquefied natural gas facilities to export more gas. That fuel is now flooding out of shale fields such as the vast Marcellus formation.
On the flip side are companies like Dow Chemical, which says shipping gas abroad will raise energy-feedstock prices at home, hurting U.S. manufacturers (like Dow Chemical). And environmental groups argue, compellingly, that exporting more gas and oil will further hook the U.S. and the rest of the world on fossil fuels, slowing a needed transition to cleaner, renewable energy.
The White House has straddled this debate. It has approved a handful of new natural-gas export projects, but the process is a slow one. Energy Secretary Ernest Moniz has raised the possibility of easing restrictions on exporting oil. Still, the U.S. exported only about 56,000 barrels of oil a day in October, less than 1% of the 7.7 million barrels a day pumped in the U.S. that month. By 2019, the U.S. is expected to be producing so much oil it will pass record output set in 1970.
Meanwhile, administration deliberations over the Keystone XL pipeline, which would transport oil from Western Canada to refineries in the U.S., has become the industrial version of “Waiting for Godot.”
Which brings us to Ukraine.
Europe gets roughly 30% of its gas from Russia, and much of that is piped through Ukraine. Gazprom, the gas and oil giant, is so powerful it accounts for more than 10% of Russia’s exports.
Moscow has used Europe’s dependence on Russian oil as an economic weapon. Over the last decade it has cut off or slowed gas supplies to a range of countries when a dispute flared over pricing or politics. Again this week Mr. Putin said he was increasing the price for gas sold to Ukraine now that the new pro-Europe government in Kiev has spurned his affections.
The shale revolution in the U.S.—controversial though it may be—has already strengthened Europe’s hand somewhat. The world is ultimately one large energy market. Plentiful gas and oil in the U.S. means America is importing less, freeing global supply to migrate to Europe and driving down some prices. More U.S. coal is also finding buyers in Europe. That has helped European nations in some instances bargain for a better deal with Gazprom.