The rise of fracking has turned the U.S. into an oil exporter and raises the possibility of total energy independence, something unthinkable two decades ago. However the potential for supplying all its own fossil fuel demand will not magically free the U.S. from messy involvement in other country’s problems, as boosters including President Donald Trump often claim. Cullen Hendrix explains why in a new post for the Peterson Institute for International Economics, prompted by the recent attack on Saudi oil facilities, widely blamed on Iran.
- Even if the U.S. weans itself from independence on Saudi oil and Middle Eastern supplies generally, the fact remains that numerous other countries — including important U.S. allies — still depend on these sources for their own energy security. That includes big countries in Asia and Europe that play a pivotal role in the world economy, meaning America can hardly afford to turn its back on them.
- America’s shift to domestic production also raises the unpleasant possibility that it will fall prey to the same “resource curse” as experienced by other countries, in which the wealth and boom-bust cycles associated with abundant natural resources undermine good governance, contributing to social and political instability and lower economic growth in the long term.
- Just as importantly, increasing domestic production won’t do much to protect American consumers from price shocks originating in market dislocations abroad, as often promised by fracking advocates. Although greater U.S. production can moderate trends in the long term, frackers can’t scale up quickly enough to make up for sudden disruptions like the loss of Saudi supply. Furthermore, the U.S. government is highly unlikely to use its own supplies to provide cheap, subsidized fuel to U.S. consumers, as other big producers have (to their own last detriment).
- Last but not least, the bigger role oil plays in the U.S. economy, the more difficult it will be to transition to a “green” economy by lessening dependence on fossil fuel, as demanded by growing numbers of its own citizens. Where before decreasing consumption would mainly hit foreign suppliers, now it is American companies and their employees who would suffer.