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The Inauguration of Energy Independence?

Will the next four years see North America become the new Middle East? With advances in extracting oil and gas, there’s a good chance, writes Duncan Wood.

By: /
21 January, 2013
By: Duncan Wood
Director of the Mexico Institute at the Woodrow Wilson International Center for Scholars

As U.S. President Barack Obama begins his second term, he faces a number of major challenges and deep divisions on the domestic front. But for the first time in living memory, a U.S. president can look forward to a four-year period in which the country’s energy policy is characterized by abundance, rather than scarcity.

The past four years have seen a revolution in the hydrocarbons industry across the world, but it has been particularly keenly felt in the United States. The advent of shale gas has meant lower energy costs and increased competitiveness for business. In oil production, developments in hydraulic fracturing and new discoveries have made a mockery of the claims of “peak oil” a few years ago.


Oil prices remain high as demand continues to strengthen globally, mostly from the major developing economies. In the United States, however, major new additions to oil production and a drop in demand thanks to new energy-efficiency measures have seen U.S. oil imports drop to the point where, by the end of 2014, it is predicted that the country will import just six million barrels of crude oil per day, or roughly a third of what it uses. To put this in perspective, in 2006, the U.S. imported more than 12 million barrels a day, and imports accounted for 60 per cent of total U.S. oil consumption.

In light of this shift in the United States’ oil balance, a debate has begun about the possibility of national oil independence, with some experts estimating that the U.S. might be in a position to export oil as early as 2020. It is easy to dismiss such optimism as verging on hubris, and there are a number of reasons to be skeptical about these calculations. As the economy continues to recover and enters into a period of sustained growth, it is probable that demand will rise again. But if we factor in the oil production of the United States’ NAFTA partners, Canada and Mexico, there is a realistic chance that the region will enter a new era where it is a net exporter of both oil and gas.

For the two smaller North American partners, this is nothing new, as both already export large quantities of oil to the United States. But eliminating the need for imports from the Middle East, Africa, and Venezuela will make possible a monumental shift in U.S. foreign policy. The opportunity to disengage from these often troublesome areas will be joined by a new importance for the U.S. in the global energy system, as it moves from being a huge importer to a source of refined products. In fact, Citigroup has already issued a report in which it speculates that North America is the world’s new Middle East.

The development of Canada and Mexico’s oil and gas industries therefore continues to be of central importance to the United States. The much-debated Keystone XL pipeline project will be one of the most controversial issues on the Washington scene this spring, and the potential for a long-awaited opening of the Mexican oil and gas sector this year is being closely watched by both government and the private sector in the U.S. If the right public policies are put in place in all three NAFTA countries in the coming months, and if a co-operative spirit prevails, the U.S. could be that much closer to energy independence.

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