Policy 360: Energy Interdependence
Following Russia’s invasion of Ukraine on February 24, 2022, many countries have experienced consistent spikes in oil and gas prices as they try to replace supplies that were once provided by Russia. The Russia-Ukraine conflict has highlighted the fact that countries are dependent on each other to buy and sell fossil fuels that maintain both the global economy and strong diplomatic ties. However, countries that are energy independent are not as affected by the conflict overall, representative of the disparate circumstances facing the international community.
Governments are realizing they must “accelerate the phase out of coal and all fossil fuels,” and implement a rapid and sustainable energy transition, said United Nations Secretary-General Antonio Guterres.
This roundtable seeks to explore how economics, climate change, and conflict influence the global oil and gas industry.
Booming Economy and Energy Independence – Mutually Exclusive for USA? Perhaps Climate-Aware Solutions Are the Answer
By Ariana Eftimiu, Barnard College ‘25
The United States’ aim to reach energy independence is longstanding, although it does not appear to be in sight just yet. The U.S. is not a self-contained energy market, as evidenced by recent geopolitical tensions causing gas prices to skyrocket nationally. Regardless of its leadership status in the exports of crude oil and refined petroleum products, the U.S. tends to oscillate between being a net importer and net exporter. The classification of the country as energy independent would rely on its capacity to export more energy products than it imports.
Additionally, there is debate on what would constitute American energy independence. For every instance, the designation of the U.S. as energy independent—as former President Donald Trump’s statement regarding the lack of foreign energy usage suggests—becomes a point of contestation. David L. Goldwyn, the leading State Department energy diplomat in the first Obama administration, stated that government officials consider true energy independence challenging to achieve, and that, “with globally priced commodities like oil and gas and now critical minerals, there is no protection from price disruption even if you have adequate physical supply.”
Although the risks associated with this practice undoubtedly outweigh its benefits, hydraulic fracturing is one attributable cause of increased oil and gas production in the U.S. If energy independence for the U.S. means significant reliance on fracking, it would be favorable to trade toxic air contaminants—the release of compounds found naturally in crude oil, including benzene, toluene, ethylbenzene, and xylene (and a mile-long list of other undesirable pollutants)—for more reliance on imports. Furthermore, regardless of domestic oil production, crude oil still “accounts for the largest share of U.S. energy imports on an energy content basis.” The oil produced domestically is light shale oil, incompatible with the majority of American refinery needs, which call for heavier crude oil.
A turn towards renewable energy sources could prove lucrative for the U.S., and is an idea circulated by President Joe Biden. This is especially true in light of the recent and ongoing Russian-Ukrainian conflict, and an expressed desire to wean the U.S. off of reliance on Russian oil. House Minority Whip Steve Scalise, among other Republicans, stated that more drilling on American soil could be the answer to a quest for energy independence, often discussed with the rhetoric of wanting “American-made” energy. However, clean energy, as discussed by Democratic consultant Jesse Ferguson, can also be described as “...the type of clean energy that would make us no longer dependent on big oil companies and tyrants like Putin.”
As a whole, the U.S. becoming energy self-sufficient is, for the most part, in the realm of a myth—and heavily up for debate. Foreign sources of energy, particularly from Canada, Mexico, Russia, Saudi Arabia, and Colombia, continue to dominate the supply side. However, the U.S. is on its way to becoming an increasingly independent producer of oil, and has surpassed several milestones, including being a net exporter of natural gas in 2017 and the world’s largest producer of petroleum hydrocarbons in 2013. Oil seems to be the largest culprit keeping the U.S. from attaining a self-sufficient status. With the desire to shift the focus of the U.S. on local production in exchange for suffering consequences due to reliance on foreign states, it is something to celebrate that renewable energy solutions could prove to be the answer. Exploring more climate-aware solutions could be the plausible strategy for addressing the insufficiency of domestic energy production. Said solutions are not only a necessary change, but a plausible solution, as costs for renewable energy continue to fall and the U.S. has potential to achieve 90-percent zero-carbon power—at no extra cost to consumers—by 2035.
Algeria—Too Energy Independent for its Own Good?
By Ashwin Marathe, Columbia College ‘25
Algeria, with the 10th largest reserves of natural gas globally and as Europe’s third-largest gas supplier, has proven its prowess on the world stage as a leader in natural gas production. Amid the Russia-Ukraine conflict, it has benefitted from an increase in revenue due to rising oil and gas prices. However, Algeria’s current success may be temporary, as it deals with the political nature of trading gas with Spain and faces volatility in oil prices. Transitioning to cleaner, renewable forms of energy may help the country strengthen its economy and attract foreign investors.
Algeria’s position as a prominent exporter of natural gas is crucial for the country, as 45% of its GDP stems from the hydrocarbon sector. Furthermore, oil and gas accounted for 98% of its exports. However, Algeria’s independent nature does not necessarily place the country in a fateful position, as this large dependence on oil and natural gas drastically reduces the variety of the country’s exports. The lack of diverse exports is unfavorable because of the volatility of oil prices, which, when falling, negatively impact Algeria’s ability to maintain high revenues. Indeed, dropping prices caused the country’s oil stabilization fund to fall from $20 billion in 2013 to $7 billion, the legal minimum, in 2017.
However, the volatility of oil prices can swing the other way and become largely beneficial for the country. Amid the Russia-Ukraine conflict and skyrocketing oil and gas prices, Algeria stands to benefit from an increase in revenue, as countries in the EU and the U.S. turn to Algeria to purchase natural gas. Algeria has two options—either increase its exports to the EU and reap large monetary benefits, which it has thus far refused to do, or honor its alliance with Russia.
Algeria further faces a decision as politics enters its calculus amid the Russia-Ukraine conflict. Currently, Algeria is transporting gas to Spain through the Medgaz pipeline. If Algeria chooses to increase its oil exports to the EU, it would have to reopen the Maghreb-Europe Gas Pipeline (MEG) that flows through Morocco. The pipeline was closed in November of 2021 due to a disagreement between Morocco and Algeria over contested land in the Western Sahara. Tensions between both countries remain high especially as Algeria has refused to acknowledge Morocco as a sovereign nation.
Although it is unclear how Algeria will handle its political conflict with Morocco, one fact is clear: for Algeria to maintain a strong economy, it will have to transition away from fossil fuels towards renewable energy. The volatility of oil only gives the country uncertainty—transitioning to cleaner forms of energy will ultimately attract greater investments and diversify exports. The government has already adopted a plan—the New Economic Growth Model of 2016-2030—which plans to derive 27% of its domestic energy through renewables by 2030.
Not only would this transition diversify the country’s exports, but it would also attract foreign investment. Countries are hesitant to invest due to the rapidly changing nature of oil and gas prices; investing in renewable energy could attract new interests from more countries. Algeria is well-positioned for solar energy due to its location in the Sahara Desert and could generate as much as 14 TWh (Terawatt hour) per year.
Algeria must make a number of decisions in the short-term that will impact its long-term political and economic stability; politically, opening up the MEG pipeline will increase revenues but may come at the cost of unstable relations with Morocco, while diversifying exports will open the country up to agreements with other foreign actors. Economically, if Algeria wants to reach its full potential, it will have to make the uncomfortable decision of moving towards renewable energies.
Saudi Arabia’s Crude Oil Will Not Become a Political Tool
By Sofia Rivera, Columbia College ‘24
On Monday, April 4, 2022, the world witnessed record high levels of crude oil prices in Asia from Saudi Arabia, as well as an increase in the cost of crude oil exports from Saudi Arabia around the world. As the world’s largest exporter of crude oil, Saudi Arabia dominates the market in an increasingly polarized political climate brought on by the Russia-Ukraine war.
Since Russia’s attack on Ukraine began in February 2022, the West has decided to pursue a strategy of relation through economic sanctions, specifically in the oil sector, and they are eager for the rest of the world to follow suit. As a result, countries that belong to the Organization of Petroleum Controlling Countries (OPEC) face a difficult decision: show support for Ukraine and the West by pumping more oil into the international market, or back Russia by allowing oil prices to skyrocket. Saudi Arabia, like its OPEC allies, has decided to pursue a seemingly neutral policy, with plans to maintain production as intended, despite the war. Saudi Arabia and the United Arab Emirates, two OPEC countries not producing at capacity, claimed that pumping oil into the market would raise rather than lower prices. Thus, the countries intend to leave the market as is, without implementing an adjustment to the amount of crude oil in circulation.
Although the U.S. is calling on countries to assist in imposing sanctions on Russia, Saudi Arabia is hesitant, given its complicated relationship with the two major powers. To begin, Saudi Arabia sees the OPEC+ agreement (which consists of the 13 core OPEC countries plus Russian-controlled areas) as essential to oil market stability. In addition, the country is hesitant to cozy up to the U.S., given the Biden administration’s efforts to reinstate the Iran Nuclear Deal and U.S. hostility following the murder of journalist Jamal Khashoggi in 2018. Thus, Saudi Arabia’s denial of American pleas for increased oil circulation is in line with past U.S.-Saudi tensions.
The largest oil company in Saudi Arabia is Saudi Aramco, a state-run organization that produces the greatest amount of oil in the world. However the Saudi government decides to respond to the crisis, this company will be responsible for carrying out those orders. Another important actor in this debate is the United Arab Emirates, from whom the Saudis confer on most energy decisions, given their involvement in OPEC.
In their refusal to adjust oil exports to lower oil prices, Saudi Arabia risks alienating the wider global community politically, particularly those who have already committed to assisting in imposing sanctions on Russia. These countries include most of Europe, Canada, Mexico, Japan, South Korea and the U.S. In contrast, if their assumption that letting more oil into the global market would instead drastically increase oil prices is likely, as seen in the 2008 crisis, their policy could help stave off another financial crisis. In addition, their decision not to adjust oil exports also affects the other 14 OPEC countries (including Venezuela, Algeria, and Nigeria), whose position in the organization centers around standards and agreements. To go against their OPEC quotas just for the sake of helping the United State’s political aims could result in major tensions within OPEC itself.
Thus, Saudi Arabia’s strategy to maintain production levels as they are is politically neutral, but economically sound. When pushed to choose between stability and political pressures from the international community, it appears it will always choose the former.
Nigeria – With a Foot in the Door, Can Nigeria Take Advantage?
By Jeremy Zhang, General Studies ‘23
A significant issue underlying the Russia-Ukraine conflict is Europe’s reliance on Russia for energy. However, with the EU essentially deciding to cut off ties with Russia in the wake of its violation of Ukrainian sovereignty, where to replace those energy imports has become an all-encompassing question. African countries, especially Nigeria, have an opportunity to step into the vacuum, leverage their vast reserves, and take a larger stake in the European energy market. However, for Nigeria to fully capitalize on this opportunity and become a major energy supplier, it will have to overcome infrastructure and security challenges while keeping in mind the global transition to renewable energy.
Nigeria has the world’s 9th largest natural gas reserves but is only the 38th highest consumer of natural gas globally and has a substantial yearly surplus, which is more than double the amount of gas it exports. There is untapped potential residing in the oil fields of Nigeria, as its “estimated 200 trillion cubic feet of gas reserves are hardly exploited.” While Nigeria has contracts that supply Spain, Portugal, France, and Belgium with natural gas, it only produces around 70% of its installed capacity. There are immediate benefits to opening up production and exporting more natural gas to Europe. The EU would be able to further separate itself from Russian energy and Nigeria would be able to earn a significant amount of revenue and establish an energy supply relationship with one of the world’s largest energy markets, long term.
Nigeria faces significant obstacles ahead if it hopes to meet its potential of becoming a global energy supplier. First, it needs to build up its export infrastructure—namely pipelines to deliver natural gas from Sub-Saharan Africa to continental Europe. There are currently two major pipeline development projects underway: Nigeria LNG Train 7 and the Trans-Saharan gas pipeline in conjunction with Algeria and Niger. The Train 7 project is currently scheduled to begin operation in 2026 and would require a significant increase in the amount of natural gas produced by Nigeria. The three partnering countries recently revived the Trans-Saharan pipeline, which will transport 30 billion cubic feet of natural gas from the three countries to Europe. There is a chance that increasing gas prices and the clear market demand from the EU would accelerate the progress and incentivize these projects to be completed as soon as possible.
However, in addition to the need to fund and build these projects, significant security concerns within Nigeria could derail these plans. Militant groups in Nigeria have threatened attacks in the gas-producing regions stemming from arguments over how to fairly distribute the income generated by the oil and gas industry. The country as a whole is also combatting Islamist attacks, insurgencies, and kidnappings for ransom. Without first securing the region and controlling these security threats, it is unlikely Nigeria will become as big an European energy partner as it desires.
Moreover, while natural gas is the necessary, short-term solution, renewable and independent seem to be most countries’ long-term goals, given what the Russia-Ukraine conflict revealed about the global energy system. Thus, Nigeria must explore renewable energy pathways, with solar power being the most promising. Only 3.7% of Nigeria’s land area is needed for solar power to equal the country’s entire oil and gas reserves. As solar energy and energy storage technologies improve, there is a distinct possibility that the sub-Saharan country could eliminate its reliance on non-renewables, and become a major player in the renewable energy market.
Nigeria is an African country with an excellent economic opportunity to move into European energy markets, but its government needs to accelerate projects and ensure the state’s security in order to capitalize. However, the Nigerian government should also be cognizant of the renewable energy transition, and possibly look into investment and capacity-building opportunities that will ensure its place in the future of global energy.
Realpolitik At Its Finest: U.S.-Venezuela Rapprochement Amid Energy Crisis
By Juan Solbes Gochicoa, Columbia College ‘24
As sanctions against Ukraine take form and the world grapples with finding new energy sources, Venezuela finds itself holding the cards in the game of power dynamics between nations. Global energy prices have spiraled, and the U.S. is seeking alternative sources of oil, of which Venezuela has the largest proven reserves. The Venezuelan economy was crippled due to sanctions imposed by the Trump administration in 2019, and, while on the rebound recently, the chance to reenter the global market is too valuable to pass up.
Defying all predictions, President Nicolas Maduro has managed to stay in power. Through hyperinflation, violence, and international repudiation, the Bolivarian movement in Venezuela is alive and well. The Bolivarian Revolution took hold when Hugo Chavez came to power in 1998 and redrafted the Venezuelan constitution in 1999, cementing his ideology in the law of the land. Now, Maduro has the chance to consolidate his power and eliminate challengers to his rule, namely opposition leader Juan Guaidó who has claimed Venezuela’s presidency since 2019. Furthermore, he has the chance to revitalize the Venezuelan economy that, while no longer terminally ill, is in desperate need of a lifeline. The oil industry in Venezuela, run by state-owned oil company PDVSA, is woefully inefficient and environmentally hazardous. Maduro has the chance to not only harness his country’s greatest resource but to play two great powers, the U.S. and Russia, against each other. Russia holds significant interests in the Venezuelan economy, and a pivot to the West in Caracas could prove increasingly isolating.
Venezuela has faced an acute political crisis since 2019 after the widely disputed 2018 presidential election resulted in opposition leader Juan Guaidó being recognized as acting president by 55 sovereign states. Largely frozen since, this conflict has had no resolution in sight, and a thaw between Biden and Maduro could signal the end of Guaidó’s claim. Opposition leaders have called for resolve as the private sector, hungry for oil, turns to Venezuelan fields. They fear that investment and increased ties between the global and Venezuelan energy markets will legitimize the continuation of Maduro’s presidency. Guaidó, recognized by the U.S. as leader of Venezuela, was not informed of an American delegation’s visit to Caracas last month. While not boding well overall, this detente could signify a restart of stalled talks between the Venezuelan government and opposition, given enough pressure by the U.S.
Politically, President Joe Biden is between a rock and a hard place. Unpopular even with his own party, an alliance with Maduro is unthinkable as is. However, Biden is also dealing with spiraling energy prices and a dwindling approval ratings in the lead-up to midterms in November. Republicans have pounced on Biden’s overture to Caracas, particularly those in crucial swing state Florida, home to hundreds of thousands of Venezuelan-Americans who escaped the Maduro regime and reject any sort of conciliatory measure with Bolivarianism. This political development is part of a larger trend where Latino immigrants escaping left-wing regimes abandon any sort of association with the Democratic Party.
If Maduro is to switch sides, though, he must move cautiously. Moscow has been a friend to the Bolivarian regime, and Russia has a significant amount of support among Venezuelans. Caracas must avoid at all costs any sort of movement seen as pandering to the U.S. Maduro has a unique opportunity to jumpstart his economy, preying on political strife in the U.S. and Russia’s increasingly solitary status. If Maduro agrees to enough concessions in terms of lessening political repression and human rights abuses, he may just be able to buy Chavismo’s ticket to power for the foreseeable future.