The Biden administration’s refusal to fully capitalize on America’s abundant natural resources is hurting the country’s national security, a fact that has crystallized over the past 18 months with Russia’s invasion of Ukraine and now the Israel-Hamas war.
Biden’s foreign policy has too often prioritized its climate change agenda over energy security, even though it contradicts America’s inherent strengths.
The United States is the world’s biggest oil and gas producer – and has been for many years since the shale revolution took hold over a decade ago. It is a bigger producer than Saudi Arabia and Russia. And it continues to grow at a robust and steady clip as producers figure out how to squeeze more barrels and Btus from shale formations.
But instead of seizing on this strength, the Biden administration is practically apologetic about America’s fossil fuel production because it is concerned about its image with environmental activists.
The wars in Ukraine and the Middle East are exposing the folly of this approach.
Antagonists like China, Russia, Iran and Venezuela have grown stronger since early 2022 when Russian tanks crossed into Ukraine. Saudi Arabia, the de facto head of the OPEC cartel and historically a close U.S. ally, is increasingly moving out of America’s orbit of influence and into the arms of Beijing and Moscow due to fundamental differences in energy policy.
U.S. national security has suffered since Biden took office. Russia continues to prosecute its war in Ukraine unfettered, with Western sanctions and embargoes failing to reduce Russia’s all-important oil and gas production and exports and a toothless price cap failing to eat into Moscow’s energy revenues, on which 40% of its state budget depends.
Irate with Biden’s push for a rapid energy transition away from oil, Riyadh has voluntarily slashed its production by 1 million barrels a day since July – both to make room for resilient Russian volumes and to keep oil prices high. Oil prices are trading around $90 a barrel, and fears of a wider Mideast conflict and OPEC’s supply restraint have the market on the boil.
China is meanwhile feasting on cheap Russian oil, which Moscow discounted heavily to attract alternative buyers after Europe enacted its oil embargo last December. Beijing is seizing on the situation to build up its crude inventories in the short term to improve its energy security while continuing to extend its global lead in clean energy manufacturing – in areas like solar panels, wind turbines, electric vehicles and batteries.
China can walk and chew gum at the same time – something that can be a challenge for Western democracies that depend on popular support at the polls every four years. Beijing knows it will be heavily reliant on oil for years to come and has thus forged closer relationships with producing nations Russia and Saudi Arabia – including deals to build new refineries and petrochemical plants that will be supplied with Saudi oil. But China also knows that the energy transition is unfolding and has positioned itself to be “the IKEA” of clean energy technologies over the long term.
Iran’s fortunes also look stronger than they have in years. Tehran’s oil exports are up 600,000 barrels a day after the Biden administration stopped enforcing sanctions Iran’s oil sector. The Biden administration has been desperate to tamp down rising prices and restart a nuclear deal with Tehran that former President Trump scuttled.
A similar scenario has played out in Venezuela, where Biden has lifted tough Trump-era sanctions despite Caracas making no meaningful democratic reforms or ensuring free and fair elections in the future. The prospect of Venezuela producing an additional 200,000 barrels a day – and possibly providing some oil price relief ahead of the 2024 presidential election – was apparently too good to resist.
Some of these moves could have been avoided had Biden not sold off record volumes of oil from the U.S. Strategic Petroleum Reserve (SPR) last year after prices spiked with the onset of the Ukraine war. But the emergency stockpile offers little cushion now, even though a real supply emergency could be right around the corner if the Mideast conflict escalates.
It’s getting harder to see what America’s end game is with its climate policy.
The U.S. will produce a record 13.1 million barrels a day of oil and 112 billion cubic feet per day of natural gas this year. When Europeans, the globe’s most prominent climate activists, lost access to their biggest supplier of oil and gas in Russia last year, who did they turn to? America. And U.S. producers delivered by sending record oil and LNG exports to the EU.
The United States has the opportunity to be that critical exporter to other markets worldwide, particularly emerging markets in Asia, over the coming decades. Because global oil demand, even under the most bearish forecast by the International Energy Agency (IEA), will remain strong through mid-century.
Energy executives scoffed at the IEA’s recent forecast that demand for fossil fuels – oil, gas and coal – will peak before 2030. But a closer look also shows that the IEA, under that same long-term forecast, expects oil demand to be over 97 million barrels a day in 2050, or just about 3% below current levels. That is no peak in demand – that is an extended plateau.
A better plan for the United States would be to clean up its oil and gas operations as much as possible to ensure it produces the most attractive product on the global market during the energy transition – barrels and Btus with a low cost and low carbon intensity.
Companies like Exxon Mobil, Chevron
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Becoming a leader in low carbon or “carbon neutral” oil and gas supply is the most reasonable – and economically prosperous – strategy for the U.S. to pursue because it plays on our nation’s existing strengths.
It certainly beats trying to catch China in the manufacturing of EVs, solar panels and wind turbines. Beijing has such a large lead due to its low labor costs that few experts believe the United States – or anyone else – can catch it.
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