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US gearing to power ahead of China by 2020

Published: November 5 2012 - 3:00AM

Obama and Romney agree on energy independence, MICHAEL RICHARDSON writes

Both United States presidential contenders agree on one thing: the US must achieve energy independence by no later than 2020 to sustain primacy as a global power and outflank rivals, especially China.

The US and China are the world's two top users of oil, natural gas and coal. So they see them as the lifeblood of advanced economies because they are the biggest generator of electricity, as well as the driver of modern transportation systems on land, in the air and at sea. Trade, economic growth, military modernisation, and better living standards are currently impossible without these fossil fuels, which account for 80 per cent of the energy consumed in America and an even higher percentage in China.

US Secretary of State Hillary Clinton noted in a recent speech that energy is fundamentally an issue of wealth and power, and that it can be a source of conflict or cooperation.

She said that the US had ''an interest in resolving disputes over energy, keeping energy supplies and markets stable through all manner of global crises, ensuring that countries don't use their energy resources or proximity to shipping routes to force others to bend to their will or forgive their bad behaviour and, above all, making sure that the American people's access to energy is secure, reliable, affordable and sustainable''.

The US, like China, has big domestic reserves of coal, enough to last for decades, although, in China's case, imports are needed for blending to raise heating quality.

So US energy diplomacy has traditionally been linked to preserving access to far-flung sources of oil and gas supply for America, its allies and friends, with the petroleum-rich Persian Gulf being a special focus of concern as local countries, first Iraq under Saddam Hussein and now Iran, have openly challenged the US presence in the region.

Major oil and gas importing economies in Asia that depend heavily on seaborne imports from the Gulf have been beneficiaries of US engagement in the Middle East, to the extent that it has helped preserve their access and kept supply disruptions to a minimum. These Asian economies include China, Japan, South Korea and India. They are drivers of Asian growth. But can they count on continued commitment of US blood and treasure to stabilise an increasingly turbulent Middle East when America faces a fiscal cliff and is becoming ever less reliant on imports of oil and gas from the region?

Whoever is the next US president, and his successors, are likely to be in a position to make new strategic choices and wield more clout in energy diplomacy.

About half China's oil imports are from the Gulf. One option may be for America to make huge savings by pulling back from an active energy-supply protection role in the Gulf if China continues to use or threaten force against Japan, India and a number of south-east Asian countries over conflicting territorial and maritime boundary claims. Beijing would then be left to defend its own interests in the Gulf and forcing it to shift assets away from an increasingly effective regional armed force in east Asia to building an expensive and even more-controversial long-distance power projection capability.

Meanwhile, Asian allies and friends of the US could offset any loss of Gulf oil and gas by buying from North American exporters and other sources as more fields are discovered and developed in Brazil, East Africa and elsewhere. Under existing policies and rates of production, the US will eliminate all natural gas imports by 2020 and cut its net oil imports to 38 per cent, about two-thirds of which will come from Canada and Mexico.

If President Barack Obama wins the elections on Tuesday and extends his fuel economy standards for motor vehicles from 2017 to 2025, America's dependence on imported oil as a percentage of national consumption may fall further and faster than currently estimated. Republican presidential candidate Mitt Romney wants not just the US but North America as a whole, including Canada and Mexico, to reach energy self-sufficiency by 2020.

North America is already the world's fastest-growing oil and gas producing region. Mr Romney says output could be further accelerated in the US by opening more federal lands and waters to drilling, giving states more power to approve permits, and building more extensive interconnecting pipelines and other energy partnerships with Canada and Mexico.

North American gas production has reached a point where large-scale exports to gas-short Asia are being planned. US mastery of improved drilling and recovery technology have unlocked extensive domestic supplies first of gas and now of oil from rock deep underground that were previously uneconomic to exploit.

This technology is largely responsible for boosting US oil output by 25 per cent since 2008, the highest growth rate of any country in that period. The leap in the past four years came after production had fallen by more than one-third in the previous 20 years.

Many thought the decline in US oil and gas self-sufficiency was irreversible as it now appears to be in China, which imports 55 per cent of its oil and 30 per cent of its gas. Chinese dependence on these critical imports is forecast to continue rising over the next decade and beyond, making it more susceptible to US energy diplomacy.

The writer is a visiting senior research fellow at the Institute of South East Asian Studies in Singapore.

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