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By Andrew Holland on Mar 30, 2012 with 6 responses

A Word on the U.S. as a Petro-State

Steve LeVine has been running a series of articles over at his blog on Foreign Policy, The Oil and the Glory about whether becoming a petro-state would change America’s character. While Steve is skeptical that the U.S. can in the future account for most of its energy requirements, I do actually believe that we’re going in that direction (see: Is the U.S. on track to join OPEC and Why U.S. Energy Policy is Poised for a Fundamental Shift).

The numbers are pretty convincing to me: we’re using less energy, especially oil, and we’re producing much more. Eventually, those curves are bound to cross, not today, or even this year, but maybe this decade.

Like me, Steve is more interested in the implications for policy of this change than whether or not it is actually happening. Steve is an expert on Putin’s Russia and he naturally draws on that for petro-state inspiration. Tongue fully in cheek, he writes in his weekly wrap, “I wondered whether we might see either Barack Obama or Mitt Romney, shirtless, hunting a tiger while hurling curses at one another.“

He then asked several of us working on this issue to comment on what we would expect to happen, as the U.S. becomes a petro state. It is an honor to be quoted along with John HofmeisterMichael LeviEd Chow, and David Biello.

Because I believe that the U.S. is already well on its way to becoming a petro-state, I wrote to Steve: “Americans see buying an electric vehicle as unpatriotic, vilify companies that make them as government stooges, and proudly fly the flag from the top of their new 16 mile-per-gallon SUVs.”

In a serious matter, becoming a Petrostate is not all roses. As Michael Ross, the author of The Oil Curse: How Petroleum Wealth Shapes the Development of Nations notes, “Countries that are rich in petroleum have less democracy, less economic stability, and more frequent civil wars than countries without oil.” I know that Robert Rapier and Sam Avro here at Consumer Energy Report point to the examples of Norway and the U.K. as major oil producers who were not undercut by the sudden development of oil, but I would hesitate to be so optimistic. Producing oil – essentially becoming energy secure – could really change American politics, foreign policy, and business. I intend to more fully explore how over the next several weeks here on the Energy, Security, Policy blog.

  1. By Samuel R. Avro on March 30, 2012 at 12:30 pm

    Eventually, those curves are bound to cross, not today, or even this year, but maybe this decade.

    Just to clarify: You see a strong possibility that the U.S. will be producing more oil than it consumes, perhaps as soon as by the end of this decade?

    I know that Robert Rapier and Sam Avro here at Consumer Energy Report point to the examples of Norway and the U.K. as major oil producers who were not undercut by the sudden development of oil, but I would hesitate to be so optimistic. Producing oil – essentially becoming energy secure – could really change American politics, foreign policy, and business.

    In my view, countries that are already strong democracies, with a government that serves the people and gets voted in by their constituents, are not as prone to the “resource curse” as countries that are ruled by authoritarian governments. Additionally, a country like the U.S. with a robust economy based on industries other than just the production of natural resources won’t suffer from that problem either.

    I’m looking forward to your future columns exploring how this will change U.S. politics, foreign policy, and business.

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    • By Optimist on March 30, 2012 at 2:11 pm

      In my view, countries that are already strong democracies, with a government that serves the people and gets voted in by their constituents, are not as prone to the “resource curse” as countries that are ruled by authoritarian governments. Additionally, a country like the U.S. with a robust economy based on industries other than just the production of natural resources won’t suffer from that problem either.

      Ah, but can we expect more of the same in future, or not?

      Ironically, I see a major threat to America, oil exporter or importer, as the snug conviction that it is always exceptional. American exceptionalism is nothing to be sneezed at, of course. But the idea that the American way is always the best way, or even the only way, is the sort of arrogance that sets you up for a fall.

      Exhibit A: the health care debate… or make that shouting match. How often do you hear “America has the best health care in the world – we can NOT change ANYTHING!” The facts show that America has the MOST EXPENSIVE health care in the world, NOT the BEST.

      American democracy is also not on such solid ground, IMHO, as is often taken for granted. Just look at the way SuperPACs are keeping fringe candidates in the Republican primaries. Or the way Mitt Romney is basically buying the nomination, admittedly against a weak field. Or the way the Electoral College basically keeps third parties in obscurity, even as both mainstream parties go more extreme. Or the way the VP selection system delivers a never-ending stream of weirdo’s: The entire Bush dynasty, Dan Quale, Al Gore, Darth Vader, John (let me zip this up) Edwards, Sarah Palin, Joe Somebody…

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    • By Andrew Holland on March 30, 2012 at 4:19 pm

      Sam – I don’t actually think that the U.S. will produce more oil than it consumes for the foreseeable future, but I do think that the U.S. will very soon be a net exporter of energy, counting gas, oil, coal.

      I would agree that countries with strong democracies are not as prone to the “resource curse” and I would add that, with the American economy being so large, no one sector could ever actually dominate politics in a way similar to Saudi Aramco or Gazprom does in their countries. 

      But – that doesn’t mean that some of Optimist’s perceptions aren’t true. Its pretty astounding, on its face, that measures to get rid of the tax credit for oil companies continues to fail. In addition, the U.S. government takes so little in royalties, compared to other countries, that most of the benefits of energy production do not accrue across society, but go to the oil companies and their shareholders. Just another way that we’re ‘exceptional’.

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  2. By NObama is GOODbama on March 30, 2012 at 6:49 pm

    Running the country as an Arabian sharia hell hole based on oil revenues would suit the izlamic King b. Hussein oumbama well.

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    • By Optimist on April 2, 2012 at 4:35 pm

      ROFLOL!

      BTW, I think you are confusing “Goodbama” with Arab and petro-buddy, King George III, aka Dubya…

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  3. By C_W on March 30, 2012 at 8:22 pm

    Interesting article Andrew. 

    “we’re using less energy, especially oil, and we’re producing much more”

    This is consistent with a recent analysis I did, for not for USA specifically, but for North America as a whole, based on data published in the BP review (see http://crash-watcher.blogspot.com/2012/03/part-3-inter-regional-trade-movements.html).  The trend is for declining inter-regional imports (i.e., petroleum from other regions to NA) and increasing inter-regional exports (i.e., petroleum from NA to other regions) .  I have my doubts that an actual cross-over point will ever be reached, but, this is the recent trend. 

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