Afghanistan, Uncertainty and Ensuring U.S. Energy Security

Mark Green
Posted August 24, 2021

The continuing story in Afghanistan is a reminder of how suddenly geopolitical events turn. Stability in the world is fleeting, and we know that global turbulence impacts energy, historically triggering oil price volatility. While the U.S. shale revolution helped keep global oil markets and costs stable, shielding American consumers from many of the impacts caused by destabilizing events in recent years, maintaining and increasing U.S. energy security should never cease to be a top national priority.

American energy security is strengthened by safe and responsible oil and natural gas production here at home. The two supplied nearly 70% of the energy Americans used in 2020, according to the U.S. Energy Information Administration (EIA). And natural gas was the leading fuel for generating electricity, EIA says, with a share nearly four times as large as wind and solar combined.

Now, Afghanistan is raising concerns that could roil global trade, including oil markets. Economist Tim Snyder, in an interview with Marketscale.com:

“The current situation in Afghanistan is deteriorating, and it’s having an effect on the oil and gas markets. Our markets, primarily related to the futures markets, rely on stability, risk assessment, and of course, market fundamentals.”

Now is not the time for the U.S. to increase its dependence on OPEC, as the White House suggested this summer in requests that OPEC+ increase its oil production (read here and here). Nor is it the time to advance federal policies that could discourage or curb U.S. oil production.

The Biden administration’s unfortunate decision to impose an indefinite pause on new oil and gas leasing on federal lands and waters looks especially unwise in the current global environment. Even in more normal times, the leasing pause – challenged in federal court by API and 11 other energy industry trade groups – weakens U.S. energy security and poses significant impacts for consumers.

Likewise, the administration’s decision to cancel the Keystone XL oil pipeline is a misstep, knocking out a piece of infrastructure that was key to strengthening North American energy.

As we’ve noted, the wrongness of the administration’s energy policies has been underscored the past couple of months as the White House pleaded with OPEC+ and bypassed U.S. energy and American workers.

Instead of choosing policies that would support increased U.S. oil and gas production, the administration has discouraged it. Meanwhile, the U.S. was forecast to once again become a net importer of oil this year – reversing a trend that made the U.S. a net oil exporter in 2020 for the first time since 1958. Dean Foreman, API chief economist:

“This is a real and tangible cost to not having domestic supply. It's pretty clear in the data that the growth of domestic supply over the last five and 10 years basically ended the stranglehold that OPEC traditionally had on crude oil prices. That's reversed now, and unless and until U.S. supply comes back, it could affect the overall price level globally and in the United States.”

These energy security points should prompt the White House to rethink its energy policies and allow U.S. natural gas and oil to again protect the economy and American consumers from the potential energy impacts of major world events.