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By Will Rogers on Jun 4, 2012 with 6 responses

Whither the Carter Doctrine? Reassessing U.S. Energy Interests in the Middle East

America’s relationship with Middle East energy resources is changing. Technological breakthroughs in hydraulic fracturing (or “fracking”), renewed drilling in ultra-deep waters in the Gulf of Mexico and, soon, drilling in the Arctic Circle are re-energizing U.S. domestic petroleum production and shrinking the demand for foreign petroleum imports. Meanwhile, oil and natural gas production in the Americas — from Canada in the North, to Brazil and Colombia in the South — are beginning to displace U.S. reliance on Middle East oil. These emerging energy trends will affect America’s relationship with the Middle East in important ways. But do not expect a fundamental shift in U.S. foreign policy in the region any time soon.

The Carter Doctrine and U.S. Energy Interests in the Middle East

The United States has had historical concerns about assured access to Middle East petroleum resources that have shaped U.S. involvement in the region. President Jimmy Carter famously declared in his 1980 State of the Union address that the United States reserved the right to use force to protect the flow of petroleum from the Middle East to the United States: “An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.”

Although U.S. interests in the Middle East have become more complex since the Carter administration – to include concerns about violent extremism, human rights abuse and nuclear proliferation – it has become almost axiomatic to say that U.S. involvement in the Middle East has been tied solely to concerns about securing access to the region’s petroleum resources. Whether or not one buys that, the perception that U.S. interests in the Middle East are tied solely to concerns about energy supplies raises some questions about whether the United States will lose interest in the Middle East as it becomes less reliant on energy imports from the region.

In years past, U.S. dependence on petroleum imports (particularly in the Middle East) sharpened concerns about assured access to energy – that is, concerns that, despite the price of oil, U.S. contracts would be met so long as U.S. consumers were willing to pay the price. In 2005, U.S. dependence on oil imports peaked, accounting for more than 60 percent of total U.S. oil consumption, with about 25 percent of all U.S. oil coming from the Middle East. As a result, U.S. policymakers have had concerns about security developments in the Middle East that could affect oil shipments from the region and severely impact the U.S economy. A closure of the Persian Gulf’s strategic choke point, the Strait of Hormuz, or an attack by violent extremists or a hostile government on the region’s critical oil and natural gas infrastructure are among some of the scenarios that U.S. policymakers have been particularly concerned with.

The Changing Energy Landscape – New Production, New Suppliers

The United States is becoming less reliant on foreign oil imports, especially from the Middle East. In 2010, U.S. petroleum consumption was for the first time in many decades provided largely from domestic production. According to the U.S. Energy Information Agency (EIA), U.S. petroleum production from domestic resources of oil and natural gas satisfied approximately 51 percent of demand that year. Moreover, increased production of shale gas and offshore oil, as well as declining U.S. fuel consumption is expected to improve the balance between domestic production and foreign oil imports. For example, by 2025, the EIA estimates that the United States will satisfy more than 60 percent of its petroleum demand from domestic resources. Meanwhile, increased production of oil in the Americas (outside the United States) will gradually shrink America’s reliance on Middle East oil. For example, Canada, already America’s number one supplier of foreign oil, is expected to sharply increase production from tar sands that will provide additional volume for U.S. consumers.

These developments will have positive benefits for U.S. concerns about assured access to energy resources from the Middle East. New suppliers of foreign oil imports in the Americas are increasingly viewed as being less vulnerable to major supply disruptions and less likely to use their resources as leverage over the United States (except perhaps for Venezuela, which is no longer a significant exporter of oil to the United States).

Nevertheless, the United States will still have enduring interest in stability and security in the Middle East, especially with the region’s energy resources. Besides keeping a watchful eye on Syria’s uprising and Iran’s nuclear weapons program, the United States will have a stake in ensuring that the Middle East’s energy resources remain uninterrupted due to concerns that disruptions in oil shipments could drive up global energy prices.  This changing relationship with Middle East energy, in simple terms, is one of moving from concerns about assured access to the region’s petroleum resources to concerns about the region’s role in ensuring affordable petroleum.

Indeed, concerns about high oil prices, particularly their impact on gasoline prices, and the knock-on effects for the U.S. economy will give the United States a continued stake in the region. Gasoline accounts for approximately 66 percent of total U.S. oil consumption, tying gasoline and global oil prices closely together. Higher gasoline prices can stifle U.S. economic growth by diverting Americans’ spending toward transportation costs and away from other important sectors. And there is no simple fix to this challenge. Efforts to diversify gasoline mixtures have hit a plateau for the foreseeable future. Ethanol, for example, will likely continue to be blended up to 15 percent of gasoline mixtures but no more due to the corrosive effects that ethanol can have on U.S. pipeline infrastructure and automobile engines. Meanwhile, the market penetration of Natural Gas Liquid vehicles will likely remain stagnant given the infrastructure challenges associated with scaling up this technology. Of course, technological improvements in vehicle fuel efficiency will help reduce overall gasoline consumption, driving down concerns about gasoline prices over time – but even this shift will be slow.

Conclusion

Of course, America’s changing relationship with Middle East energy does present some opportunities for the United States. The shift from concerns about assured access to energy may allow the United States to reduce its role as the sole guarantor of security in the region, and increase its role as a partner to work by, with and through other countries to help them develop their capacity to provide for their own security and protect the region’s petroleum resources from disruptions. Although this may not seem like a significant shift in foreign policy, having a lighter footprint in the Middle East would allow the United States to be more nimble in an increasingly constrained fiscal environment.

The bottom line: America’s changing relationship with Middle East energy is important. But it is important not to oversell the foreign policy implications of this developing story. The United States has an outsized dependence on petroleum and until the United States makes significant efforts to diversify away from petroleum, America will have a stake in anything that affects the global petroleum market, including the Middle East.

  1. By Robert Rapier on June 5, 2012 at 11:22 am

    For example, Canada, already America’s number one supplier of foreign oil, is expected to sharply increase production from tar sands that will provide additional volume for U.S. consumers.

    Great post Will. How much do you think will depend on approval of the Keystone XL Pipeline? I think the speed of tar sands development comes down only to the price of oil, and that regardless of Keystone it will get to market.

    RR

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  2. By Will Rogers on June 5, 2012 at 4:58 pm

    Thanks for your comment, Robert. I think you’re exactly right: the speed of tar sands development will likely depend on the price of oil, regardless of the Keystone XL pipeline. More importantly, technological improvements in tar sand production may actually make those resources more affordable to produce, suggesting that even if global oil prices dip, those tar sands are still likely to be economically viable.

    As I am sure you know, this technological breakthrough, the in situ process, that is being employed to produce Canadian tar sands involves pumping extremely hot steam into ground to melt the bitumen (the actual tar) in place and then pumping it up for extraction and processing (as opposed to digging at the surface and loading the tar sands in a truck to be transported for refining into synthetic fuel). I don’t have hard figures, but my sense is that this approach is probably more cost-effective, and, importantly, enables producers to exploit the estimated 80 percent of tar sand reserves that are too deep for conventional surface mining. 

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    • By Tom G. on June 5, 2012 at 10:06 pm

      Will:

      Do you know if the in-situ method is more or less carbon intensive and by how much? 

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      • By Will Rogers on June 6, 2012 at 9:13 am

        Hi Tom, 

        Daniel Yergin writes about this in his new book, The Quest, and states that Canadian tar sands do have higher lifecycle greenhouse gas emissions compared to conventional oil – that is, the total emissions from production, development and use. (Yergin simply calls this a “well to wheels” analysis.) 

        According to Yergin, “A range of studies finds that a barrel of oil sands adds about 5 to 15 percent more CO2 to the atmosphere than an average barrel of oil used in the United States.” (Yergin, The Quest, 257.)

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        • By Tom G. on June 6, 2012 at 11:34 am

          Thank you for the quick reply Will.  On another note:

          Since we [the U.S.] need oil at least in the short term, it seems to me that re-routing the tar sands pipeline to less sensitive lands would satisfy many peoples concerns.  Even if much of the oil is refined in TX and shipped off-shore, the availability of that oil at some future date seems important to me.  In addition, as North Dakota continues to ramp production the pipeline will begin to carry more and more U.S. based crude which to me is also an important aspect.

          One thing I don’t understand is why more of the tar sand oil is not refined at the source; both in Canada and the U.S.  It seems to me we are just one more hurricane away from another oil crisis by relying on TX or Gulf Coast refineries.

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  3. By euroflycars on June 6, 2012 at 5:11 pm

    US Middle East policy is indeed undergoing change, but probably not in the way the author explains.

    The new policy will indeed be dealing with the energy at stake beyond petroleum — and Big Oil has enough power to ensure a firm grip on the new source, which will be solar energy from the world’s largest deserts.

    That’s what Libya was all about — although not really for the sake of assured access to solar energy from the Sahara!

    The reason why the USA invested 1 billion dollars in the Libyan war to eliminate Gaddafi (along with 300 million from France) was neither access to petroleum nor to the Sahara’s solar energy (since the USA have their own large deserts), but the fierce determination to prevent a dramatic price drop of PV panels through extremely large-scale mass-production as for the joint germano-libyan (and the forthcoming even huger Germany-lead DESERTEC projects), considering that PV technology is eminently predestined to enable individual energy autarcy at a global scale in the longer run… and that Big Oil just wants to continue holding us hostages at the outlets of their huge existing and anticipated energy supply networks.

    More specifically the Libyan threat arouse from a partnership between Germany and Libya for a huge photovoltaic project in the Libyan desert with a massive underground hydrogen generation and storage plant — a project launched in the early eighties and consistently designated by Gaddafi as an irrigation plant, while the CIA consistently denounced it as a huge chemical weapons production complex.

    Under Bill Clinton, the policy presumably changed from a threat of destruction (including nuking the complex), to an offer to protect the hundreds or even thousands of planned square kilometres of highly visible and vulnerable PV panels, from hostile neighbouring oil nations, with the help of the US aeronaval forces in the region.

    The claimed counter-part was most presumably a complete technology transfer from Germany to the USA — whereby the promise of the Shell Oil company to build Europe’s largest PV production plant in Gelsenkirchen (GE) which to date has failed to produce significant amounts of PV panels, is to be seen as a bad trick played by Big Oil on the Germans and Gaddafi.

    As the project leader, Daimler-Benz launched their Model A specifically designed for the forthcoming aera of hydrogen fuel-cell driven cars. This rather surprising car was based on a thorough intermediate floor with the passenger room above and the drive train below — a design which gave it a high-heeled aspect and actually an abnormally high center of gravity, causing it to roll over during the Swedish elk test, so that DB had to retrofit an expensive electronic drive assistance system to a number of 2000 cars already sold.

    As to the merger of DB and (the ailing) Chrysler, this may be seen as an industrial framework set up in order to ease the negotiated large-scale transfer of hydrogen production technology from Germany to the USA (a deal which finally caused DB a loss of 30 billion DM).

    You are now deemed to know why Germany abstained from the assasination plot against Gaddafi — what you are not deemed to know is that Lockerbie was not a bombing but an accident… but that’s a different story.

    It is the above explained strategy pursued by Big Oil and the US government that will most probably determine the US Middle East policy in the future — with a more radical change of policy with the Saudis in the pipeline, as they just decided to invest over a 100 billion petrodollars in solar energy… with a 24 billion share for PV!

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