Flexibility, Certainty in Energy Regulation Keys to Future Recovery and National Security, Experts Say
Energy security has been a primary concern of American foreign policy for decades and is always a key concern during election years. This year is no exception, though the combined impact of the COVID-19 pandemic, an oil price war, and massive economic shutdowns have created uncertainty for businesses, consumers, and industry. What’s crucial now, experts said at a digital panel hosted by The Hill, is to create a flexible policy framework that will allow for future recovery.
“[Energy independence] has had a dramatic impact not only on our economic growth and opportunity but also international security,” said Texas Rep. Bill Flores (R). “Our balance of trade is improved because of [the] energy dominance that we’ve recently achieved and… our geopolitical risks are reduced by being energy dominant and by being in a position to produce enough to cover not only our energy needs, but to export all the gas and energy to other parts of the world.”
Production growth in the last decade turned the U.S. from an energy importer to one of the world’s largest energy exporters, with dramatic effects on both energy security and national security. Domestic energy reserves have meant that the U.S. is more insulated from instability in the Middle East than it has been in decades. Strong production also allowed for energy exports to places like Eastern Europe which welcomed a non-Russian source of energy.
“We shouldn’t weaponize energy when it comes to our diplomatic and national security efforts,” Flores continued. “That said if we are energy dominant we should certainly use it as a tool to be able to provide for greater national security and geopolitical stability and, to the extent that we can jawbone our European friends into not using Russian gas–I think that all of us are better off. Not only our allies but we as Americans and world stability overall.”
For Russia in particular, U.S. production has meant less money from energy sales, something that has cut into government tax revenues and left the Kremlin less able to pay for domestic services and foreign military engagements.
At the start of the year, this had led many to predict a new age of American energy dominance. However, a price war between Russia and Saudi Arabia earlier this year, paired with the crushing economic downturn caused by COVID-19 and the shutdowns dramatically changed the industry outlook for 2020 and beyond.
Though production has slowed, the security benefits of a resilient energy sector remain, analysts say. What is important is a secure supply, which may come through trade agreements with friendly nations.
“We’ve been talking about this idea of the United States being a net exporter of energy as if this is the lofty goal that we are all striving for. I think you can accomplish energy security in a number of ways, which may or may not including being a net energy exporter,” said Jennifer Gordon, managing editor and senior fellow of the Atlantic Council’s Global Energy Center. “Sometimes it may make sense to import energy as well, which is where Europe and Candida may come in.”
A balance of imports and exports reflects the varying demands and infrastructure of different parts of the country. Areas around the Gulf Coast, for example, may export oil to South and Central America while the northeastern seaboard imports gasoline from friendly nations.
“I think that’s fine as long as the trade relationships are solid,” Gordon continued.
Trade agreements are one example of an area where sound policy can reap major benefits for both industry growth and national security. Stability in climate and trade policy, as well as predictable regulation helps companies to plan for the future and to invest in new technologies.
“It doesn’t help our companies if you have this completely unstable policy environment where the one administration wants this and the next administration wants that,” said Paul Saunders, president of the Energy Innovation Reform Project and a senior fellow in U.S. foreign policy at the Center for the National Interest. “You don’t know how to invest, you don’t know how to run your business.”
A lack of certainty is especially hard for small to mid-sized businesses, which lack the resources and capital to weather economic uncertainty, including many operating in oil and natural gas. This stability may come through a broader policy establishing more clearly what American energy goals are broadly.
“[Rankings of exports and imports] are a nice yard stick, but the real driver and the real area that I think we should be prioritizing is innovation,” Saunders continued, listing advanced nuclear power and carbon capture as areas that could benefit from an influx of government investment. “Similar kinds of innovations and leadership it could really make a great difference to the United States.”
By reinvesting in continuing new development, today’s energy dominance can also build a new energy future.