The Trump administration’s recent decision to sanction any country that continues to buy Iranian oil represents a bold diplomatic step – one that has the potential to change the geopolitical calculus in the Middle East.
The sanctions, if they work as intended, will create considerable pressure on Iran’s oil revenues, which, according to American officials, are used to fund “destabilizing” activists throughout this historically volatile region. Pursuing greater stability in the Middle East is a worthwhile goal – one that every administration in recent history has pursued with varying degrees of effectiveness. And beyond seeking to advance this important objective, President Trump’s new sanctions will also make an impact across the global energy market.
The bulk of Iran’s oil exports go to five countries: China, India, Japan, South Korea and Turkey. The latter three are American treaty partners, and the former two are among the world’s largest economies and fossil fuel consumers. If American sanctions skew the economics of continuing to import Iranian oil on an ongoing basis, these five important nations will find themselves in the market for a new stream of reliable energy to offset the loss of Iranian oil.
The United States – now the world’s leading oil and gas producer – has the resources, manpower, technology and expertise needed to fill this emerging supply void. Doing so would provide our allies and trading partners with the energy they need to power their economies, enhancing our global geopolitical standing in the process.
We can’t do that, though, if we don’t address the growing challenges facing our nation’s insufficient energy infrastructure.
By nearly every measure, we are in a golden age of domestic energy production. After generations of conventional wisdom placing the center of the energy world in the Middle East or Russia, the U.S. is now the undisputed global energy leader. Much of the American energy boom has been driven by natural gas, but in the context of President Trump’s new Iranian oil sanctions, it’s important to note that American crude oil production is also historically prolific.
Thanks to increased production from within tight rock formations driven in large part by advanced techniques like horizontal drilling and hydraulic fracturing, American crude oil production grew 17 percent in 2018 to nearly 11 million barrels per day. That’s the most we’ve ever produced, topping a record set in 1970 – and the Energy Information Administration expects that number to continue to grow in the years ahead.
Growing production has helped meet domestic demand – and it’s also helped increase exports to our allies. Petroleum product exports, just like crude oil production, hit a record high in 2018.
This is all good news, and momentum within the domestic energy sector is strong. But despite this growth, limited pipeline capacity – often driven by knee-jerk ideological gamesmanship delaying or blocking worthwhile pipeline expansions – is weighing on American energy.
In Texas’ Permian Basin, lagging infrastructure has slowed the pace of the region’s otherwise breakneck growth. Moody’s predicted last year that a “lack of pipelines to carry oil and natural gas out of the Permian basin in West Texas and southeastern New Mexico will limit exploration and production and weaken realized prices.” Pipeline bottlenecks have also restricted the flow of resources to export terminals on the Gulf Coast.
In the northeast, failure to expand pipeline infrastructure to keep pace with growing natural gas consumption has led to supply shortages, threatened reliability and even led us to import gas resources from Russia to meet demand. In New York City and its surrounding areas, lack of pipeline capacity has led utilities to place a moratorium on new gas connections until new projects are approved.
The world’s energy superpower shouldn’t face such travails. More efficient review and permitting processes are essential to maximizing the impact of our vast resources – both at home and abroad. New executive orders aim to do just that – and represent an important step forward in strengthening energy infrastructure.
There is much yet to be written when it comes to stability in the Middle East, and it’s not yet clear what impact these sanctions will have. But as we examine the path forward, we should also take the opportunity to take stock of the broader role our nation’s energy industry can play.
American oil and gas can make as big a difference on the global geopolitical stage as it has at home. Efficient pipeline infrastructure plays an essential role in making the most of our energy prowess.
James “Spider” Marks is a retired U.S. Army major general and strategic advisor to the GAIN Coalition.
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