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Energy Policy as a Key Component of National Security

When Russia invaded Ukraine, Europe realized the danger of being dependent on Russia for its energy supplies and has since moved towards other energy sources and adoption of more renewable energy. Similarly, as the world deglobalizes, US policymakers see the need to ensure US energy security and are looking to adopt domestic energy policy that can provide a counterweight to shifting geopolitical dynamics.

At the end of March, House Republicans passed their top legislative priority, the Lower Energy Costs Act, which seeks to increase oil and gas production and exports, improve permitting for energy distribution, and enable mining of critical minerals. While the bill, as written, will not pass the Senate, its passage is important for two major reasons. First, Republicans are likely to push for some of the permitting ideas as part of negotiations to lift the debt ceiling. Second, a number of the bill’s proposals demonstrate how the US will focus on its energy security needs longer term, which will include both fossil fuel and clean energy production, as well as the ability to export energy to counteract the influence of other actors.

Energy permitting to be part of the debt ceiling negotiations. House Republicans are calling for spending cuts in exchange for raising the debt ceiling later this summer, to which Democrats are opposed. In order to find a compromise, other policy measures can be included. Energy permitting reform is a viable option for this, as it can support the development of both fossil fuel energy and renewable energy.

Longer term, the US wants to provide a counterweight on energy. High oil prices create geopolitical instability. In fact, the last three Russian invasions occurred when crude prices hit $100 per barrel (see right). OPEC+ cut production at its last two meetings, which is seen as a way to prop up a Russian economy struggling under Western sanctions. And while the US used to be dependent on the Persian Gulf for oil, China is now the region’s largest customer, which is leading to an alliance between Saudi Arabia and China. This alliance is also seen as a threat to the “petrodollar” trade, which helps support the US as the world reserve currency. The US and Saudi Arabia have had a long-standing partnership in which the US has provided security and Saudi Arabia has conducted oil trades in US dollars. While China would like to dethrone the US dollar as the world reserve currency, a key reason the US dollar has maintained that status is the stability and the strength of the US economy. It’s hard to see an alternative currency emerging that would have those same characteristics in the near term, but we do generally see a diversification away from the dollar beginning to occur.

US policymakers see energy policy as a means to counteract these dynamics. Lower oil prices can restrain Putin’s adventurism. US energy security prevents US dependency on other countries, and US energy exports can prevent US allies from being dependent on Russia or OPEC+ members. This will be a longer term policy priority, but a first step can be achieved by attaching permitting to the debt ceiling.


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