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The US energy revolution

Michael Knigge / sacJuly 27, 2013

An American dream would come true: studies show the US could become independent from energy imports by 2030. This forecast has lit a gold rush fever in the energy sector and sparked a geopolitical debate.

A natural gas well pad sits in front of the Roan Plateau near Rifle, Co.(AP Photo/David Zalubowski, File)
Image: AP

In the middle of the 1973 oil crisis, US President Richard Nixon committed the American people to the initiative "Project Independence." Ever since that speech in November 1973, energy self-sufficiency has been the political goal of all US presidents. Nixon's vision to transform the United States into a self-sufficient energy provider by 1980 failed just as all other efforts since then. But now, 40 years later, this dream could possibly become reality after all.

The International Energy Agency (IEA) in Paris predicted late last year the US was at the forefront of a shift in global energy flows. According to the IEA forecast, the United States could replace Russia as the world's largest gas producer as early as 2015, and Saudi Arabia as the largest oil producer in 2017. The IEA said the US could become a net exporter of gas beginning in 2020, and practically develop into a complete self-sufficient energy provider by 2035 - that is - become completely independent of all energy imports.

Energy independence day

The US bank Citigroup and the US government's National Intelligence Council (NIC) released similar forecasts. Citibank analysts estimate in their report "Energy 2020: Independence Day" that US independence from energy imports could even begin at the end of this decade under certain conditions. According to NIC, the US could  become a significant energy exporter from 2020 on.

A recently published survey by consultancy firm KPMG found that nearly two-thirds of all top managers in US energy companies believed the United States could become independent from energy imports by 2030.

Oil well Foto: Sebastian Widmann dpa +++(c) dpa - Bildfunk+++
Could OPEC soon be a thing of the past?Image: picture alliance/dpa

The trend of decreasing energy imports to the US is nothing new. Due to the massive use of improved production technology, such as the controversial fracking, the US has for years produced growing amounts of its own oil and gas. At the same time, oil consumption has declined in the course of the economic crisis.

The result: since 2005, the US has successively imported less oil. Last year, the US  imported just 40 percent of its oil consumption. In 2005, this figure was still 60 percent of consumption. By 2019, the US Energy Information Administration (EIA) forecasts, imports will sink to 34 percent. In comparison, Europe's largest economy Germany is practically completely dependent on energy imports. According to IEA, Germany acquires some 95 percent of its oil and 85 percent of its gas needs from abroad.

No oil from disagreeable regimes

The decreasing dependence on imported oil has geopolitical implications. The Citibank experts have predicted the end of OPEC and the bank's top analyst declared in the Wall Street Journal North America as the new Middle East. In addition to the economic expectations of decreasing energy costs, there are also political hopes behind such sentiments to no longer be dependent on disagreeable oil regimes.

"We're not going to have to buy oil from the Middle East, Venezuela, or any other place we don't want to," the Republican presidential candidate Mitt Romney said during his campaign. Finally, Washington would no longer have to consider a region's or country's energy resources when developing its geopolitical commitments. But there are also critical voices about the US energy boom. These do not doubt the decreasing dependency on imported energy, but they do criticize the validity of the forecasts, as well as their implications.

Car pumping gas URL http://de.fotolia.com/id/622437 Phototom - Fotolia.com
Americans could soon be pumping domestically produced gasImage: Fotolia/Phototom

A lacking basis

"We simply don't have any empirical basis for really going beyond 'what if's'," said Anthony Cordesman, foreign policy expert at the Center for Strategic and International Studies (CSIS) in Washington. "Making best case assumptions regardless of cost and the environment - based on very preliminary data - simply doesn't make any sense." As opposed to the forecasts currently being discussed, there are no official models for the future on the part of the US government which confirm these positions. In fact, US oil imports will even increase slightly to 37 percent by 2040, according to the latest EIA annual report.

A further point of criticism about the studies is their sole focus on oil supplies to the US.

"The US will want to continue to engage in the Middle East and maintain a well-functioning world oil market, in part because its European and Asian allies will continue to rely on that oil," said Jeff Colgan, an expert on the geopolitics of oil at Washington's American University.

If energy independence is only measured by direct imports, that completely ignores the fact that the US is a significant importer of finished products from Asia and Europe, notes Cordesman. So it therefore has a significant self-interest in the continued energy supply of this region, he added.

Hope for oil regimes

While oil imports from Canada and Iraq are increasing, those from Venezuela and Mexico are declining. The African nations of Nigeria and Angola have suffered even more dramatic declines. From 2011 to 2012, US oil imports from Nigeria, Africa's largest producer, decreased by half, according to EIA. The imports from Angola also gave way by more than 30 percent in the past year.

Still, despite the falling direct dependence on foreign oil supply, Washington argues the experts will not turn away from the Middle East or any other energy-rich region in the future. Even if the United States managed to become less dependent on energy imports or possibly even completely independent, secure energy flows remain essential for a functioning world economy and by extension to the US economy.