How the U.S. Shale Energy Boom Can Help During Crises Like in Ukraine

The crisis in Ukraine illustrates clearly the importance of energy security. The Wall Street Journal reports that Gazprom, Russia’s state-controlled oil and natural gas company, is using natural gas prices to pressure Ukraine:

Russian state-controlled natural-gas giant OAO Gazprom said Tuesday it would raise natural-gas prices for Ukraine—a move that ratchets up financial pressure on Kiev and raises the economic stakes in the standoff between Moscow and Western Europe.

Ukraine’s lack of energy security has placed it in this unenviable situation.

Today, the U.S. Chamber’s Institute for 21st Century Energy released its 2nd International Index of Energy Security Risk, measuring the energy security of 25 large energy-consuming countries. Norway is at the top of the list followed by Mexico, New Zealand, the United Kingdom, and Canada. Ukraine ranks last.

For the United States, its energy security situation is quite different. It ranks six, climbing one place since last year and four places since 2002 because of the shale energy boom.

The Index finds that increased U.S. energy production has resulted in lower price volatility and improved energy security for all countries in the Index. For instance, increased production by the United States (835,000 barrels) made up for Iranian oil production (687,000 barrels) taken off world markets because of economic sanctions.

The report finds that the shale energy boom also has lowered natural gas supply risks:

Gas import risks remain very high for many countries, especially in Europe and Asia. It is now expected that by 2020, the United States will be a net exporter of natural gas. This is already having an impact on overseas markets, where shipments once destined for the United States are being diverted to European and other markets.

In short, improved energy security in one country–the U.S.–has improved energy security in all countries.

Going back to the Ukraine situation, an implication from the Index is that if oil and natural gas export barriers were removed, U.S. energy abundance could play an important role in stabilizing world energy markets during times of instability and global uncertainty.

Christopher Guith, vice president for policy at the Energy Institute told Bloomberg, “This is a geopolitical fulcrum that we could be utilizing if we didn’t have this protectionist constraint on U.S. energy.”

On a press call, Steve Eule, vice president at the Energy Institute noted that since Russia is “not afraid to use its energy power for political ends” this argues for greater U.S. energy exports.

Karen Harbert, president and CEO of the Institute for 21st Century Energy, also on the call, added, “Sending a market signal” like speedy approval of liquefied natural gas (LNG) export facilities “will have a calming market effect.” “Democratic [oil and natural gas] molecules from the West” will reduce volatility and improve energy diversity and security for both a Europe reliant on Russia for gas, and a Japan who has become less energy diverse following the Fukushima reactor disaster in 2011.

Foreign policy analysts agree. “[A]dditional suppliers will give European customers leverage they can use to negotiate better terms with Russian producers, as they managed to do in 2010 and 2011,” write Council on Foreign Relations Fellows Robert Blackwill and Meghan O’Sullivan [via Lachlan Markay].

The Ukraine situation makes clear that by lowering energy export barriers, the United States’ shale energy boom can help lower energy price volatility and improve global energy security especially in times of crisis.

The full International Index of Energy Security Risk and an interactive map can be found at the Institute for 21st Century Energy’s website.

UPDATE: Lachlan Markay at the Washington Free Beacon reports that Congressional leaders are calling for lifting energy export restrictions in light of the Ukraine situation. Senator Lisa Murkowski (R-AK) for example:

Sen. Lisa Murkowski (R., Alaska), ranking member of the Energy and Natural Resources Committee, told an audience in Houston on Monday that current export restrictions are reducing the country’s ability to “respond quickly and nimbly” to punitive market manipulations by Russia and others.

“If this was a situation where we wanted to use our natural gas opportunities as political leverage, we’re not in that place now,” she said.