IEEJ：July 2016○ｃ IEEJ 2016

Special Bulletin

A Japanese Perspective on the International Energy Landscape (279)

July 7, 2016

Reaffirming U.S.’s Importance for International Energy Market
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan

U.S. presidential election campaigns are intensifying as Democratic candidate Hillary
Clinton is well expected to race with Republican candidate Donald Trump. Even at present, thesecampaigns focus on the qualification or quality of these candidates rather than specific or detailed
policy debate. In the run-up to the Democratic and Republican Parties’ conventions late this month tonominate their respective presidential candidates, policy debate is expected to deepen.
On Clinton’s use of her personal email system during her time as secretary of state for
official communications, Federal Investigation Bureau Director James B. Comey on July 5 announced
his decision to refrain from recommending the Department of Justice to indict Clinton, saying thatwhile Clinton and her colleagues “were extremely careless in their handling of very sensitive, highlyclassified information,” the handling fell short of being illegal. The FBI decision was significant for
Clinton who would have plunged into a difficult situation if she were indicted. However, Trump andother Republican leaders harshly criticized the decision and enhanced their attitude of questioning
Clinton’s qualification as a presidential candidate. While Trump’s remarks have surprised the world,recent polls have indicated Clinton’s lead over Trump. Future presidential election campaign
developments including how the email scandal would develop may attract public attention.

The U.S. presidential election will continue to attract attention because who will lead theworld’s largest economic and military power in the next four years and what political, economic,energy and environmental policies the leader will adopt are very important. Strictly, as a matter ofcourse, presidential authorities are not limitless. It is insufficient to pay attention only to thepresident’s characteristics and policies. However, who the leader representing the United States would
be is significant for the United States and the whole of the world. This is because the United Statesoccupies the most important position in the world. This report reviews the importance of the UnitedStates from the viewpoint of the country’s position in the international energy market.

The United States is no longer the largest energy consumer in the world. Since China
replaced the United States as the world’s largest energy consumer in 2009, their energy consumption
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gap has steadily widened. In 2015, the United States accounted for 17% of global primary energy
consumption, against 23% for China. Behind this situation, however, China has an energy supply anddemand structure biased to coal, with coal consumption expansion boosting China to the position ofthe world’s largest energy consumer. China captured 50% of global coal consumption in 2015, farsurpassing 11% for India as the second largest coal consumer in the world and 10% for the UnitedStates as the third. As for other energy sources including oil, gas, nuclear and renewable energy(excluding hydro), the United States is still the largest consumer or user in the world. Of global
consumption of oil as the most important for international energy trade and gas as the second, theUnited States commanded the respective dominant shares of 20% and 23% in 2015.

The shale revolution has emerged in the oil and gas market where the United States occupies
a dominant position. Under the revolution, U.S. oil production almost doubled from 6.79 million
barrels per day in 2008 to 12.7 million bpd in 2015, posting a substantial, rapid increase. U.S. gas
production also expanded substantially from 511.1 billion cubic meter (BCM) in 2005 to 767.3 BCM
in 2015. The United States is now the world’s largest oil and gas producer as well. It is the world’s top
consumer and producer of oil and gas. Its substantial oil and gas production expansion has greatly
influenced its domestic supply and demand, and prices, and become a major factor behind the current
loose supply-demand balance in the international oil and gas market. Actually, U.S. oil exports haveincreased substantially. Furthermore, the United States is set to expand liquefied natural gas exports.
Recent slack oil prices have triggered a shale oil production cut, which has prompted international oil
supply and demand to go in the direction of rebalancing. On the contrary, a recovery in oil prices is
expected to trigger a shale oil production increase again to cap oil price hikes, according to someobservers. Ultimately, U.S. energy market developments have great presence and influences.

As a matter of course, we should pay attention not only to oil and gas. How coal power
plants occupying a central position in the U.S. electricity mix will be replaced with other power plants
under President Barack Obama’s Clean Power Plan is an unignorable problem beyond the simple
energy supply and demand issue, in terms of impacts on greenhouse gas emission reduction policies.
Another development attracting global attention is a move to shut down nuclear power plants in theliberalized electricity market in the world’s largest nuclear power generating country under the shale
revolution that has lowered gas prices.

In this way, how the U.S. energy market as the center of the global energy market willchange will become significant for the world. Although the market changes depending ontechnological and industrial initiatives or the economic logic, relevant policies’ influences areimportant. While domestic U.S. policies exert impacts on the world through those on the U.S. market,
U.S. foreign policy and international strategies influence the global energy market as well.

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This is because the United States occupies the central position in global energy governance.
How the United States views global energy security and acts in international negotiations anddiscussions on climate change have grave influences on the world’s stability and order. Clearly, U.S.
foreign and energy policies involving U.S. bilateral relations with Russia, China, Saudi Arabia, Iranand the European Union have greatly influenced the development and stability of the global energy
market.

Surely, the gravity center of energy consumption is steadily shifting to Asia. It may beneedless to say that the Middle East and Russia are important as oil-producing and resource-richregions. As described above, however, the United States’ importance for the international energy
market is remarkably high. Therefore, what the new leadership in the United States will be like is thegreatest matter of interest in the energy world.

Contact: report@tky.ieej.or.jp
The back issues are available at the following URL
http://eneken.ieej.or.jp/en/special_bulletin.html

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