The New Map: Energy, Climate, and the Clash of Nations

by Daniel Yergin

forthcoming, and Freeport could finally begin construction on its $13 billion project in 2014. S...

No country has benefited more from the growing global LNG business than Qatar. Today it has the highest per capita income in the world, and a sovereign wealth fund of $350 billion—all

The LNG wealth finances its Al Jazeera global television network. It also finances an educational hub and the Mideast campuses of several educational institutions—Weill Cornell medical school, Georgetown University, Texas A&M, Northwestern, and Carnegie Mellon, along with Canada’s University of Calgary, University College London, and the University of Aberdeen.

The LNG business is becoming ever more global. New export projects are being developed in Egypt, Trinidad, Oman, Israel, Angola, Nigeria, Canada, Mozambique, and Russia. The much-expanded scale and the growing list of new buyers has changed the market. Long-term contracts remain, and new ones are being signed. But some LNG began to be traded differently—sold on a short-term basis. Cargoes would set out for one destination, and then, as a new bid came in, change course for another, and then change course again. LNG was now no longer only an integrated business; it was also becoming a competitive market of buyers and sellers.

In 2019, after an investment of more than a quarter trillion dollars, Australia overtook Qatar to become the largest LNG supplier. Qatar was not going to stay in second place. It lifted a self-imposed limit and announced p...

But a new era for LNG began in February 2016. After what had turned into an investment totaling $20 billion, the first shipment of U.S. LNG left Cheniere’s Sabine Pass for Brazil. From then on, like clockwork, every few days tankers almost a thousand feet long were departing the dock at S...

in Asia, Europe, Africa, Latin America, North America, and Australia were now linked together in a global network of trade. Freeport and Sempra Cameron started exporting in 2019. Several more plants are under construction in the United States. Altogether this will catapult the United State...

Donald Trump personally turned himself into America’s top LNG salesman. When India’s prime minister Narendra Modi visited Washington, Trump told him that he was looking forward to “exporting more American energy to your country,” including “major long-term contracts to purchase American natural gas, which are being negotiated right now.”

Korea, one of the world’s biggest buyers of LNG,

had signed a twenty-year contract for U.S. LNG worth more than half a billion dollars a year.

These foreign leaders might be a little confused by Trump’s comments, since the U.S. government does not itself negotiate LNG contracts. But the message was clear: It behooved other governments to push their companies to buy U.S. LNG.

Yet the stance of the Trump administration created some perplexity. “For many years, we have been arguing with the Russians and Chinese not to see energy trade in political terms,” said the CEO of one of the major oil companies. “But now the U.S. president is doing exactly that, and the Russians and Chinese can say to us, ‘We told you so.’”

The United States is delivering 60 percent of Mexico’s total gas supply and 65 percent of its gasoline. This is part of the new map of North American energy integration.

Keystone XL, which would move oil from Canada’s huge oil sands reserves down to refineries in the United States. Anti–fossil fuel activists seized on blocking pipelines that would connect new resources to markets, and the twelve-hundred-mile Keystone segment became their galvanizing and highly visible symbol. Less noticed was that the proposed pipeline length was equivalent to about one-half of 1 percent of the over two hundred thousand miles of oil pipelines that already lay beneath the soil of the United States.

Canada and the United States are highly integrated on the North American energy map. In Canada, technological advances had led to rapid growth in production from the oil sands, primarily centered in the province of Alberta. Between 2000 and 2019, Canada’s crude oil output more than doubled, reaching 4.5 million barrels a day—more than Iraq or Iran, pre-sanctions. While some is consumed in Canada, most is exported to the United States. Canada supplied, in 2019, about 50 percent of total U.S. oil imports, a volume three times greater than all the oil the United States imported from OPEC countries. The growth of Canadian imports was seen as a major contribution to U.S. energy security. This trade is also a key element in the $600 billion-plus trading relationship between the two countries.

The greenhouse gas (GHG) intensity of Canadian oil sands has fallen by more than 20 percent over a decade, and current trends indicat...

Keystone, whose initial leg was proposed in 2005, is actually a network of existing and proposed pipelines developed by TC Energy, formerly TransCanada. In 2012, when gasoline prices hit $4 a gallon and seemed destined to go higher, President Obama flew to Cushing, Oklahoma, the major hub for pipelines and oil storage in the United States. Striding dramatically out of a labyrinth of huge pipes, he took to the podium to, in effect, dedicate the southern segment of the Keystone system. “A company called TransCanada has applied to build a new pipeline to speed more oil from Cushing to state-of-the-art refineries down on the Gulf Coast,” the president said. “Today, I’m directing my administration to cut through the red tape, break through the bureaucratic hurdles, and make this project a priority, to go ahead and get it done.” He added, “My administration has approved dozens of new oil and gas pipelines over the last three years.”

Because the pipeline would cross an international border, law required that the State Department sign off on it, including on the environmental impacts. Two bureaus at State spent a total of seven years reviewing the proposed pipelines and eventually, in 2015, came out with a report large enough to fill a bookshelf—eleven volumes in all—saying that the project

should be approved and that there was no environmental reason not to do so.

Secretary of State John Kerry disagreed. Despite the State Department’s finding, he nixed Keystone XL for fear, he explained, of the unfortunate impression that would result. Approval “would undercut the credibility and influence of the United States in urging other countries to put forward ambitious actions and implement efforts to combat climate change.” His decision was greeted with dismay in Canada.

What Keystone has clearly demonstrated is that pipeline approvals are no longer like watching paint dry. They have become potent political dramas.

It was in North Dakota, however, that the anti-pipeline opposition rose to a new level of intensity.

The Dakota Access pipeline was designed to move almost 600,000 barrels per day from the booming Bakken in North Dakota to a terminal in Illinois.

Dakota Access, a project of Energy Transfer Partners and other companies, would supplant 740 railcars of oil a day. In early 2016, the $3.8 billion pipeline was moving ahead, with almost every mile of the 1,172 miles completed. It had gone through its environmental reviews and had received the approval of the U.S. Army Corps of Engineers, which is required by law to sign off on parts of pipelines that cross or go below rivers and waterways. The company had also consulted with about fifty Indian tribes and made 140 revisions in the route as a result.

The last thing to be completed was a 1,320-foot segment—a quarter of a mile—that would be a hundred feet below the bed of the Missouri River. The Army Corps of Engineers gave the go-ahead in a 1,261-page report—almost

the oil crisis of 1973—the October War and the Arab oil embargo—that sent petroleum prices spiraling up fourfold.

The oil crisis was a shock not only because of the economic and price impact. It also meant, many said, that the United States was weaker, dependent on OPEC,

its foreign policy and its economy vulnerable to the decisions of oil exporters or to disruptions in supply.

In November 1973, President Richard Nixon proclaimed the goal of U.S. “energy indepe...

By 2005, net imports had risen to 60 percent of total consumption, and seemed sure to rise in the decades ahead.

Why was there a ban on exporting crude oil?

The ban had also helped to protect the domestic system of price controls that the Nixon administration had instituted to fight inflation.

In the late 1970s, President Jimmy Carter,

began phasing out a complex, dysfunctional system of energy price controls, which discouraged investment and set different prices for the same type of molecule.

Ronald Reagan’s first official act on becoming president in January 1981 was to completely abolish domestic price controls on oil. The following autumn, without any fuss or hullabaloo, the Reagan administration also ended restrictions on exporting petroleum products—gasoline, diesel, and jet fuel, and other products that had gone through the refining process. No one seemed to notice. But the ban on crude oil exports remained. There matters reste...

The turning point came in April 2015, when Senator Lisa Murkowski, chairman of the Senate Energy Committee, observed that the export ban “equates to a sanctions regime against ourselves.” Why, she asked, was the U.S. government lifting the “sanctions on Iranian oil” as part of the 2015 nuclear deal “while keeping sanctions on American oil”? She was joined by two other senators in arguing that exporting crude oil to “our friends and allies” would bolster both the security

of U.S. partners and America’s own international position. The European Union broadcast the same message, declaring that U.S. crude oil exports would, in the aftermath of Russia’s moves on Ukraine in 2014, enhance European energy security.

To get the ban lifted came down to a deal on Capitol Hill between Republicans and Democrats—removing the prohibition of crude oil exports in exchange for extending and expanding tax credits for solar and wind.

The deal was signed into law on December 18, 2015. A week and a half later, a tanker cast off from the Texas port of Corpus Christi carrying a cargo of crude oil from the Eagle Ford, bound for France.

The ban on crude oil exports was now history. By 2019, U.S. net oil imports were down from the 60 percent of total supply they had been in 2008 to less than 3 percent. And even as the United States continued to import oil, it was also exporting almost three million barrels per day of crude oil—making it one of the largest crude oil exp...

This was not just a matter of additional oil supplies. What was unfolding was an historic shift in both world oil and the global economy, a...

This BRIC era was characterized by what became known as the “commodity supercycle”—high and rising prices

driven by strong economic growth in those countries.

During the BRIC era, it was this grow...

that became the defining factor for the wo...

The first question—about diversifying Russia’s economy, reducing its heavy dependence on commodities—was directed to President Putin. In passing, however, the questioner happened to mention shale gas. At that, the Russian president erupted. He launched a broadside, warning against possible shale gas development in Eastern Europe, denouncing shale gas as a grave danger, an environmental threat, a despoiler of land and water. The questioner sank back into his seat.

Putin reacted so vehemently because shale gas was also becoming a matter of geopolitics. For shale was a challenge for Russia, at the time the world’s largest producer of natural gas, as well as the major supplier to Europe. Around the world, it was becoming clear that the unconventional revolution is about more than the flow of oil and gas. It is also about the relative positions of nations.

For four decades, U.S. energy policy was dominated—and its foreign policy hobbled—by the specter of shortage and vulnerability, going back to the 1973 oil embargoes and then the 1979 Iranian Revolution, which toppled the shah and brought the Ayatollah Khomeini to power. But no longer. The shale revolution “affords Washington,” observed Thomas Donilon, national security advisor to President Obama, “a stronger hand in pursuing and implementing its international security goals.” Secretary of State Mike Pompeo would subsequently put it differently—that the shale revolution has provided the United States with a flexibility in international affairs that it had not had for decades.

For more than a century, energy—its availability, access, and flows—has been intertwined with security and geopolitics. As a Brookings Institution study put it, “In the modern era, no other commodity has played such a pivotal role in driving political and economic turmoil, and there is every reason to expect this to continue.”

At the beginning of the Cold War in 1950, with Saudi oil exports starting to flow, President Harry Truman extended an explicit American security guarantee to King Ibn Saud. “No threat to your Kingdom,” the president wrote, “could occur which would not be a matter of immediate concern to the United States.”3 That commitment, at the time aimed at preventing those resources from falling into Soviet hands, continued after the Cold War. The current extensive U.S. security engagement with the Arab