It is easy for people to forget that sliding back into growing dependence on OPEC oil could not be more ill-timed. Such a policy would do more harm than good — a lesson we learned painfully in the 1970s.
President Trump’s strategy of appealing to Saudi Arabia to increase oil production, while tearing up the nuclear deal with Iran and reducing Iran’s oil exports to zero, adds up to shortages down the road. His plan to impose tariffs on imports of steel and aluminum confused matters further, since imported specialty steel is needed for construction of oil and gas pipelines and other energy facilities in the United States.
Instead of pleading with Saudi King Salman to increase oil production, Trump should be addressing the imperative to stimulate oil production throughout North America, while also stressing renewed efforts at energy conservation.
No thanks to Trump, the United States actually increased its oil production in 2017, reaching an average of 9.4 million barrels per day. The 5.6 percent increase, small but encouraging, was driven by innovative advances in shale-oil production — increases in horizontal and directional drilling — and sustained by market forces.
But shale production alone is not enough to meet growing demand for oil. The government needs to create a regulatory structure that stimulates, rather than impedes, new energy exploration and production in coastal areas and the Alaskan wilderness. Opening up offshore areas in the Atlantic and Pacific, Alaska and the eastern Gulf of Mexico, would provide an estimated 100 billion barrels of oil and 420 trillion cubic feet of natural gas — enough to last for decades.
The reality is that a goal of total energy independence is probably unachievable. It’s both too costly and unnecessary. Currently the United States relies on net imports of more than 3 million barrels a day of crude oil and refined products to meet nearly 16 percent of our country’s petroleum needs. This import dependence persists because the East and West coasts depend on shipments of foreign oil, since there isn’t enough pipeline capacity to provide access to Midwest oil. Also, certain grades of crude oil that some refineries need are supplied by other countries.
But we shouldn’t trade energy security for additional supplies from the Persian Gulf. Saudi Arabia has promised to provide an additional 2 million barrels a day, but it has yet to open its taps. Nor can we expect much from other pro-Western OPEC producers such as Kuwait and the United Arab Emirates. There simply isn’t much spare oil capacity.
Meanwhile, the potential loss of 2.5 million barrels a day of Iranian oil — which is more than 2.5 percent of global supplies — could lead to shortages and a ramp-up in gasoline prices.
We need prudent insurance against a sudden cutoff in oil supplies from the Persian Gulf. The region is still a tinderbox. Much of the world’s oil supply would be at risk if war erupts between Israel and Iran. Oil traders worry that a major curtailment of the Persian Gulf’s output could risk creating a supply crunch that might drive world oil prices sky high.
While the Trump administration may view domestic oil production as a driver of job creation and growth, its most important role is energy security. We need an energy policy that makes the most of our domestic resources, diversifies our energy supply, and assures that American consumers and businesses have a dependable supply of affordable energy.