The US oil production will overcome the Saudi oil output by 2017. This shift in energetic balance will have a massive effect on America's relations with Middle Eastern countries. Things will change. But they might not change for better.

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Black Gold – a pumpkjack well in Mexico (Image Source: Wikimedia Commons).

Hardisty is a town of 634 souls, lost in the Canadian countryside, in the Alberta state. There is a lake park with a camping side. There is also a nine-hole golf pitch with a clubhouse. There is no high school and a bus drives students to the closest institute, 20 miles away, every morning.

Cushing, 1,600 miles below, down to Oklahoma, is another countryside town. Nearly 8,000 people, one high school. Deeply Republican. Notable people? A running back who played in the National Football League in the 80′s. Again, Cushing is not a megalopolis.

These two towns, surfacing among crop fields and farms, are the symbol of America’s effort to cope with domestic energy demands. The Keystone pipeline connects Cushing and Hardisty; a long line running from the oil sand fields in Alberta to the world’s biggest crude oil storage site, Cushing, also know as the “Pipeline Crossroad of the World”.

In March 2012, Barack Obama addressed the people of Cushing, congratulating them for the growth in oil production. He also pledged to extend the existing pipeline.

“Under my administration, America is producing more oil today than at any time in the last eight years. We’ve added enough new oil and gas pipeline to encircle the Earth and then some. So we are drilling all over the place,“ said Obama in his speech, presenting his energy policy. “It’s a strategy that will keep us on track to further reduce our dependence on foreign oil, put more people back to work, and ultimately help to curb the spike in gas prices that we’re seeing year after year after year.”

The plan is building an additional branch – the Keystone XL -  from Cushing to the Gulf of Mexico, to avoid the shipping and to pump everything straight to the refineries.

Cushing. Photo Credit: Wikipedia

Cushing. Image Source: Wikipedia

This is the new face of America trying to implement an autonomous energy supply and to reduce its “dependence on foreign oil”, through drilling and building brand-new pipelines. The strategy seems to work. The forecasts for US oil production are well beyond the word “optimistic”. Goldman Sachs, as well as many other firms, predicts that by 2017, United States will become the world’s largest oil producer, ahead of Saudi Arabia.

“Given our outlook for continued robust growth in US oil production and recent press reports of Saudi production cuts,”says Robert Wine, British Petroleum Press Officer. “It is possible that the US could pass Saudi Arabia as the leading producer of liquid fuels this year. US domestic energy production will be sufficient to match 99% of domestic consumption by 2030.”

Saudi Arabia is the world’s top oil producer. It owns 25% of the global oil reserves. They flood the market with nearly 7,6 million barrels every day. Topping this record means increasing US national production by 75% in four years.

Straight to the Gulf - Pipes for the Keystone Pipeline, in 2009 (Image source: Wikimedia Commons).

Straight to the Gulf – Pipes for the Keystone Pipeline, in 2009 (Image source: Wikimedia Commons).

The fact that US foreign policies and diplomatic ties are largely oil-driven is not a mystery – it’s no secret that, in the past 70 years, the US as well as the Western world have relied on the Arab oil. It remains to be seen how this will thus affect US foreign policies in the Middle East.

Examples of oil-diplomacy are known to be neither smooth nor easy. Take, for example, the harsh relations between the US and Colonel Gaddafi’s Libya; or the invasion of Iraq, back in 2003, whose justification was not uniquely about Saddam’s Weapons of Mass Destruction – as UN reports confirmed; or the closure of the Hormuz strait, back in 2011. Iran threatened to close the strait in retaliation to the massive burden of sanctions on the Islamic Republic. As an unlucky coincidence, almost 17 billion barrels pass through the strait, every day. The blockade imposed by the Iranian military Navy made the oil prices skyrocket in just few weeks.

Saudi Arabia’s relationship with the US was always based on mutual convenience. After 9/11, both Washington and Riyadh were allies in War on Terror. US wanted stability in the area. Later on, Saudi Arabia wanted to preserve their power in spite of the Arab Spring. US needed oil for a convenient price. Saudi Arabia needed arms.

In 2008, the US Senate struggled to approve a resolution to help cut soaring gasoline prices by providing the Saudi government with 900 cutting-edge military kits in return for increasing oil production. The resolution aimed at securing the Gulf area and winning support for the growing sanctions on Iran. Despite the potential revenue – about $20 billion – the decision was stalling at the Senate as the Saudis were not keen on downing the price of the crude oil from 75 cents to 50 cents per gallon.

“We are saying to the Saudis that, if you don’t help us, why should we be helping you? ” said the democratic Senator Chuck Schumer. “We are saying that we need real relief, and we need it quickly. You need our arms, but we need you to cooperate and not strangle American consumers.”  The resolution passed, eventually.

According to statistics: throughout Bush’s terms, the arms dealing with Saudi doubled from $19 billion between 2001-2004 to  $40 billion between 2005- 2008. In the last five years, under Obama’s administration, the deals reached $60 billion.

In the last five years, under Obama’s administration, the [arms] deals reached $60 billion. 

At the end of December 2011, the US Department of State held a press briefing about a further arms sale to Saudi Arabia. The agreement included 84 brand new F-15 combat aircrafts for an eight-figure sum: $30 billion. The Assistant secretary Andrew Shapiro declared:

“This agreement serves to reinforce the strong and enduring relationship between the United States and Saudi Arabia.”

No matter how much discounted oil you can get. Providing cutting-edge arms is also a strategy to ensure the stability of the region, crucial for American interests.

“There are geopolitical interests at stake, driving the arms deal. Saudi Arabia works with the US as they have a common strategy and common agreement,” says Farhang Moradi, senior lecturer in Globalisation and Development at University of Westminster, London.

Shipping F-15s to Riyadh is a first-line defence to empower the biggest US ally in the region. But

“We have to keep in mind that buying arms in respect of selling oil could be the case. However, buying advanced arms doesn’t put the Saudi in the position of defining the area from actors such as Iran.”

Security, first – The positions of the American military bases in the Persian Gulf (Image Source: Google Maps).

An additional security belt of air and ground bases extends all around Iran and the Persian Gulf. There are at least 21 bases in Saudi Arabia, Qatar, Oman, United Arab Emirates, Iraq, Bahrain and Kuwait. The question we should answer is whether the military infrastructures are about to be left behind now that the burden of regional interests and energy need is shrinking.

“These bases are giving them the infrastructures to check and balance. It costs them something but the cost is worth it in order to manage the gulf,” says Moradi.

The military presence is a result of with oil production and the control of the political actors. The Gulf oil has always been a priority for the US. But in the age of the war on terror and the growing threat of a nuclear Iran, abandoning the battlefield is not a strategy-wise option. In the same regard, we should not expect the sanctions against Iran to diminish and that the US army will leave their bases anytime soon.

The real shift in the region could come in the long run.

“If US oil demands fall, it doesn’t mean that foreign demand won’t continue. Emerging countries suck oik; China, India, Turkey. They need oil on their routes to development” says Moradi.

According to many, in ten years time there will be a new producer-consumer relationship in the region. It will not involve the US anymore. Russia, China, India will be bounded by new energy ties.

“The demand for oil is going to be pretty good. Those producing oil are therefore going to export a lot. The balance of forces will change in terms of energy and power. Those changes will have subsequent effects upon other countries that may perceive themselves as competing powers against USA; China and Russia.”

The US secretary of Defence, Leon Panetta announced that just one aircraft carrier will be deployed in the Gulf instead of two. The decision is motivated by defence budget cuts. Is it a sign of the de-prioritisation of the control of the Gulf?

This likely shift of interest will cause a scenario where China and India will discontinue being mere investors in the Middle East and Central Asia. In the near future they could install bases and military infrastructures in the region, while the American ones will be gone.

The de-Americanisation of the Gulf is yet to come. But the first signs are already emerging. At the beginning of February, the US secretary of Defence, Leon Panetta announced that just one aircraft carrier will be deployed in the Gulf instead of two. The decision is motivated by defence budget cuts. Is it a sign of the de-prioritisation of the control of the Gulf? Probably. In the meantime, the lowering security in the area, as well the US’ soft way of dealing with the Arab Spring, is making the Gulf States nervous. Are diplomatic relations facing a crisis? It is definitely a sign of an upcoming change.

Image credit: progressohio/flickr

Image credit: progressohio/flickr

The surge in US oil and natural gas production, which will scatter the American diplomatic ties, is not without reason. America suddenly found out that underneath their land, millions of barrels of sweet crude oil were reachable by merely changing the drilling technique. A well-known one is called ‘fracking’ which involves fracturing layers of rock and pumping water and sand in the well to get to the oil reserve. Tens of sites in the US were considered worthless till fracking was introduced. Fracturing the rocks allow to reach deep and huge oil reserves, otherwise out-of-the-way. That’s how the States are turning into a Saudi Arabia with burgers, baseball, and guns.

Fracking is a magical key to richest oilfields and natural gas reserves in the country but

“Done badly – with poor oversight from the regulators and the industry – there is ample evidence that fracking can cause problems for drinking water quality.” Says Charlie Kronick, Greenpeace environment and energy expert, commenting on fracking and its impact.

The most direct consequence is that fractures could extend from the well to the rocks around. The crude oil could filter through and surface, affecting the ground water reserves.

“It can also cause local earthquakes as well as Methane leakage – which would greatly add impact to the greenhouse effect.”

Wells will rise in number. Pipelines will be built. Refineries will be modernised to cope with the millions of barrel of West Texas Intermediate – the benchmark for the American oil – pumped to the Gulf Coast. There, tankers will crowd the main oil terminal. Environmental threat runs fast all along this production chain.

Done badly – with poor oversight from the regulators and the industry – there is ample evidence that fracking can cause problems for drinking water quality

The Keystone XL pipeline itself is a danger for ground water reserves. It will run through Nebraska’s water reserves, employed in 20% of American field – agricultural field, this time.

“The real question is whether the country and the Obama administration wants to risk this precious resource,” says Kronick “Keystone would run right through Midwest – the biggest aquifer. As you know, pipelines inevitably leak.”

Production is not just about drilling in the ground. New offshore implants are about to be settled in the water of the Gulf of Mexico.

“Our exploration portfolio will enable us to drill-out some successful places like the Gulf of Mexico Palaeogene,” states the BP press officer Robert Wine.

British Petroleum regained the authorisation to drill in the Gulf. The five million barrel spillage following the explosion of the Deepwater Horizon implant in 2010 are still fresh memories in the minds of the American. Nobody knows what could happen if oil extraction will go on without proper safety protocols and regulations.

“The return on capital is the overriding aim. BP – or any oil company - will be in a constant struggle to do their jobs as cheaply as possible.” Argues Kronick “The Deepwater Horizon leak was a crystal clear example of this. It means that the environment and people of the Gulf of Mexico will continue to be at risk.”

Catastrophe – The fire on the Deepwater/Horizon platform. Gulf of Mexico, 2010 (Image source: Wikimedia Commons).

Trying to get hold of people to have their say on the matter of US energy independence is not easy. Among several stiff replies like “I have nothing more to say on the matter”, some pieces of information could emerge and change everything. I tried to get in touch with the US Energy Information Administration. The fruit of writing a polite email was a four-page PDF report, dating back to December 2012. However, in the email, a small note by EIA Office of Petroleum, Natural Gas, & Biofuels Analyst Philip Buzdik said:

“Saudi oil production is determined by Saudi government policy. The Saudis could potentially produce more oil than they do now, but for whatever reasons they choose not to do so. I have nothing more to say on the matter. Best wishes…”

At the end of the day, the United States of America is overcoming Saudi Arabia for a simple reason. The cuts on Saudi production are part of a well-planned economic strategy. The more oil you pump, the more oil you have on the market. The more oil on the market, the lower the price of the oil. The Saudi government knows that injecting the market with more than the necessary amount of oil would reduce revenues. To top it all, American oil production is expected to overcome the Saudi’s 2020. However, Saudi Arabia will regain its position by 2027.

US is living the dream, for now. The perspective of giving up the dependence on Saudi oil is appealing. The Keystone pipeline will open job positions for thousands of American workers which is good news as 7.9% of the working population remain unemployed. But the achievement of energy independence sounds like a fluffy fairy tale without the “living happily ever after”.

Saudi oil production is determined by Saudi government policy. Saudis could potentially produce more oil than they do now, but for whatever reasons they choose not to do so.

“I believe we need an all-of-the-above strategy. That means producing more biofuels. More fuel-efficient cars. More solar power. More wind power,” Barack Obama stated, in Cushing, last year.

The question we should ask is whether an energy independent country – whose economy is based on domestic fossil fuels – is actually motivated to move towards a green economy model?

So far, small countryside town such as Hardisty and Cushing are getting bigger, richer and prouder, among crop fields. The Keystone is the symbol of this new era. But, if the forecasts are correct, this new American dream won’t last long. If green energy merely remains an electoral pledge and Saudi re-opens the taps while the US is unable to remain energy independent, the backlash could be far worse than any price fluctuation or discounted stock of F-15. Without green energy, without oil, without allies.