Three inescapable risks

According to the Brookings Institute, the global energy landscape is largely in favour of the US. Domestic production is growing and the US is poised to become a net exporter of natural gas as early as 2018, as well as the top oil producer in the world by 2020.

Meanwhile, energy flows are shifting eastwards, with import dependence growing in Asia. As a result, Asian countries are experiencing an increased number of energy-related risks.

However, the new US energy surplus and the accumulation of risk in Asia does not mean that the US can avoid global risks associated with energy. There are three global risks that the Brookings Institute highlights that the US cannot escape: price, politics and pollution.

The three inescapable risks

Price

There is a global price of oil: a rise in the price of oil for China, Russia and any other country is also a rise in the price of oil for the US. Greater domestic will help hedge supply risk, but the US will still feel the effects when energy costs are high. The country will need to remain involved in trying to keep oil prices stable, and ideally low.

Politics

The Brookings Institute insists that in the energy sector, it’s always political. Economies can’t function without energy, nor can they change their energy mix overnight. This leaves countries heavily dependent on key trading relationships. Energy is also an essential factor in strategic power projection, and is treated by most governments not as a market good but rather as a strategic commodity. These global political considerations will not be removed from America’s energy interests even as the US becomes more energy independent.

Pollution

The US must consider energy-induced risks to climate. While the pollution that now troubles cities such as China is felt primarily locally, the burning of vast quantities of fossil fuels has global impacts on climate. Indeed, Chinese pollution is already affecting air quality on the West Coast of the US.

Brookings concludes that although the US may be tempted to retreat from energy politics on the basis of increased energy independence, it cannot remove itself entirely. Instead, it must remain engaged in regards to matters of economics, national security and environmental stability.

Adapted from a press release by Emma McAleavey.

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