January 8, 2015
Host: The Atlantic Council
Amos Hochstein, Coordinator for International Energy Affairs, U.S. Department of State
For the past several months, since October of 2014, global oil prices have been plummeting. With crude oil now trading at below $60 dollars a barrel, Mr. Hochstein speculates that the world may be experiencing “the early days of a new reality.” The advent of new technologies and the development of shale natural gas among other renewable energies, have quickly transformed the global energy landscape, creating a more diverse market of energy producers and transforming long-time energy importers – such as the United States – into energy producers and exporters. Although many of these new sources of energy, particularly natural gas, have yet to be tapped and exported, the mere fact that they exist are reshaping the global energy outlook and having an immediate effect on the energy market.
In the Americas, the boom in U.S. and Canadian production is already leading to new policy approaches in Central America and throughout the Caribbean. While many Caribbean countries have long relied on Venezuela to provide them with cheap energy in return for diplomatic and humanitarian support, there is now potential to redraw the region’s energy landscape. With Venezuela now struggling to meet its fiscal needs, its cheap energy is quickly evaporating and an opening for the U.S. to establish a presence in the Central American energy market is taking shape.
With Vice President Biden spearheading this initiative, Mr. Hochstein is optimistic that U.S. companies will soon be able to start investing heavily in redeveloping the Central American and Caribbean energy landscapes and establishing power-plants and grids that not only run on locally produced energy but also promote interconnectivity and energy access throughout the region.
Similarly, in Europe, Mr. Hochstein sees both potential and a dire need to rethink and redraw the continent’s energy landscape. Over the past decade, the EU, Ukraine, and other Eastern European countries had become overly dependent on Russian oil and gas. In March, many European leaders condemned Russia’s annexation of Crimea but very few could back up their rhetoric with action, largely due to how dependent they were on Russia for energy and economic stability. Further, as the crisis in Ukraine intensified, Russia continuously used its energy suppliers as tools to exert economic pressure on Ukraine and the EU. There is now a broad recognition throughout the EU and Eastern Europe that countries must diversify their energy portfolios in order to ensure their future security.
In 2014, Ukraine was spared an energy crisis only because its neighbors, Hungary, Slovakia, and Poland, were able to reroute their own Russian produced energy into Ukraine. The EU and the rest of Europe, according to Mr. Hochstein, needs more protective measures like those demonstrated around Ukraine. By promoting further interconnectivity, the EU can both strengthen its energy security and promote competition by opening itself up to new energy sources like Azerbaijan and Croatia, which in turn would force Russia and other pre-existing energy suppliers to compete on a more level playing filed.
In the volatile, global energy market, promoting efficiency, accessibility, and sustainability are crucial to assuring future prosperity. With this fact in mind, Mr. Hochstein is wary of the potential harm that shifting energy trends may cause in 2015. In particular, he is worried that the increased use of natural gas, although a cleaner form of fossil fuel than oil or coal, will have a more damaging impact on the environment than current fossil fuel usage, simply because global energy consumption is growing. However, while the shift to natural gas does not solve the world’s looming energy problems, it does provide a wealth of new opportunities around the globe for future prosperity, cooperation, and technological advancements. For better or for worse, 2015 will mark the beginning of a new era for U.S. energy and energy around the world.