Saudi Energy Minister Khaled al-Faleh and Russian Energy Minister Alexander Novak attend a meeting of OPEC and non-OPEC members on April 20, 2018. Photo: Amer HIlabi/AFP via Getty Images
Market fears of snapback sanctions on Iranian oil exports have caused oil prices to rise, providing a stark reminder that the U.S. is still the world's largest oil consumer. In response to the trend, President Trump said that such prices "will not be accepted."
Why it Matters: In a global oil market dominated by OPEC and private U.S. shale producers, the Trump administration actually has little direct influence on prices and is largely at the mercy of market forces. Meanwhile, the administration has done little on clean energy, where policy could make a meaningful impact.
In past price spikes, administrations were limited mostly to releasing strategic petroleum reserves. But now, the availability of significant U.S. shale oil exports at least partially offsets the impact of geopolitical disruptions from Iran or Venezuela, without the use of reserves. Yet the surge in U.S. crude exports is a market- rather than government-led exercise. As such, it is hard to manage as a policy tool, due to myriad factors ranging from individual company investment decisions to infrastructure bottlenecks.
Yes, but: While the Trump administration searches for policy direction with OPEC and oil market disruptions, it has retreated from an active role on renewable and alternative energy, where the market alone is not likely to drive U.S. leadership. Absent clearer policy signals from Washington on clean energy and climate policy, it is doubtful that the U.S. will keep pace with China as it aggressively deploys state capitalism to lead in areas such as batteries and electric vehicles.
The bottom line: To a far greater extent than policy, it's the strength of capital markets, infrastructure, upstream technology and human capital that have driven U.S. energy dominance through the shale boom. It is less clear that these same assets, absent government leadership, will be as effective in maintaining that dominance in the energy markets of tomorrow.
Robert Johnston is CEO of Eurasia Group and a Fellow at the Atlantic Council Global Energy Center.