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"Energy dominance" was always a ridiculous US slogan, but now it has become a dangerous one. Washington thinks its newfound oil and gas production translates into geopolitical power. Its war in Iran has ensured this dominance will be brief and the fall hard.
US energy dominance hung from four cables. Three have been cut and one is fraying. The first was that the US could control the Gulf and protect, or deny, its petroleum supplies – implied by the 1980 Carter Doctrine. The second cable is that the US will be perceived as a reliable energy supplier.
The third is that the status of the US as a net exporter of natural gas, since 2017, and oil, since 2020, protects it from the economic consequences of energy supply shocks. The fourth is that oil and gas will remain the world’s essential energy source indefinitely.
When previous US leaders – from Dwight D Eisenhower to Richard Nixon, Jimmy Carter, George W Bush and Barack Obama – intervened in the Middle East, the risk to energy supplies was always a crucial part of their thinking. Even in the case of the most reckless escapade, the 2003 invasion of Iraq, the US planned to protect petroleum infrastructure and keep oil prices down.
In contrast, everything the US has done on the energy side in this war looks like botched improvisation.
President Donald Trump walked away from the nuclear agreement with Tehran in May 2018 and twice broke off negotiations with Iran by bombing the country, last June and on February 28 this year. The US and Israel have killed several Iranian leaders who looked like plausible diplomatic counterparts.
So Tehran knows it cannot rely on any assurances from Washington. Iran's indiscriminate attacks have ruined its relationships with its Gulf neighbours, too. Only hard power – the ability to throttle the Strait of Hormuz, or the possession of nuclear weapons – can assure it some security. That is now true of any leadership, even a future pragmatic reformer or secular nationalist.
Yet it is not acceptable to anyone – neither Washington nor Israel, nor the Arab states, nor Paris, London, New Delhi or Tokyo, nor even Beijing – for Tehran to become the gatekeeper of the Gulf.
The US does not look like a reliable guarantor either. “The Hormuz Strait will have to be guarded and policed, as necessary, by those who use it – the United States does not," Mr Trump said in a post on social media. Even if the American military can reopen the strait, the bulk of its fleet and air force cannot indefinitely escort merchant ships around Hormuz, while China looks to Taiwan and other crises flare.
Does the US care?
Maybe the US does not care how others suffer? There is an idea that it is less vulnerable to energy shocks than most other major countries, because it is a large oil and gas producer and exporter, and because domestic fuel prices are generally low compared with Europe and Japan.
But crude oil and refined products are traded in global markets. US petrol prices are lower mostly because fuel taxation is less. A rise in oil prices therefore translates into a much bigger percentage increase in pump prices than in Europe.
Americans drive much further than Europeans. The fuel economy of American cars is far worse and people in the US buy fewer electric vehicles. They have minimal public transport options outside a few big cities.
That is why US presidents have always been so sensitive to high petrol prices. “I expected worse … I thought that oil prices would go much higher,” Mr Trump has said, something he may politically regret when November’s midterm elections come around.
The Soviet Union was a huge oil and gas producer. It got a temporary sugar rush from the 1970s oil price rises, put off reform, quarrelled with China, blundered into Afghanistan and collapsed when prices fell again.
The US will also probably try to exert its “energy dominance” in this period, in return for concessions by other countries over trade, investment, military affairs or whatever else it wants.
But the US is not a Saudi Arabia or Russia that can direct its energy companies to increase or decrease production, or to sell or not sell to certain customers. It has already had to drop its blunt weapon of sanctions – allowing the free sale of oil from Russia and, amazingly, even Iran that is already at sea.
The US might shoot itself in the foot again – for example, banning oil exports to keep prices low for domestic consumers. This would hammer its domestic petroleum industry and inflame the international economic damage. Or, it might prevent liquefied natural gas (LNG) exports to European countries if they refuse to join a task force in the Gulf. That would at one stroke ruin both its whole energy export business and what remains of Nato.
US energy dominance is based on creaking 20th century technology, for all the ingenuity of the shale producers. It will enjoy a few more good years as it fills the gap of the Gulf crisis. Several new LNG export plants, along the Gulf of Mexico and maybe even Alaska, will secure approval and funding. US natural gas prices will rise as they meet that need and the appetite of data centres.
Energy consumers, though, will rush away from oil and gas. The whole argument that they are cheaper and more reliable than renewable energy has gone up in smoke.
China emerges as winner
Beijing will be by far the biggest beneficiary, for four reasons. It has more diverse fossil fuel options than most countries, from its own domestic coal and hydrocarbons, to secure imports of Russian and Central Asian oil and gas overland or through the Arctic. Its domestic power system installs more renewables and nuclear power than anyone.
It is the clean-tech manufacturing and export powerhouse. On the way are electric cars that are cheaper than petrol-powered vehicles, can be charged in a few minutes and have ranges up to 1,000km. Sales by China’s BYD, the world’s biggest electric car maker, have leapt as motorists worry about pump prices.
Solar power was already surging before the war as panel costs plummeted – and in unexpected places, from Poland to Pakistan to the Philippines. With high natural gas prices, Asian countries will stick with local coal for baseload power, while installing solar and wind with batteries as fast as possible.
And China dominates the supply chains for critical minerals.
The US needed time to catch up. It had probably already lost the race but, in a slow transition, it might have been able to work with Europe and Asian partners to establish a solid non-Chinese non-fossil alternative. It will not be able to keep up with the rapid, chaotic energy revolution the war in the Gulf will unleash. Within a decade, its mirage of energy dominance will become energy depression.
