IEEJ：September 2021©IEEJ 2021
Special Bulletin
A Japanese Perspective on the International Energy Landscape (552)

September 30, 2021

Turnaround in U.S. Strategic Perception (3): Energy Security Perception
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan“Let us set as our national goal, in the spirit of Apollo, with the determination of theManhattan Project, that by the end of this decade we will have developed the potential to meet ourown energy needs without depending on any foreign energy sources,” then U.S. President Richard
Nixon said in an address in November 1973 announcing Project Independence, a new large-scalenational project to achieve energy independence for the United States then plagued with the serious
impact of the first oil crisis.
In the 20th century called the Century of Oil, the United States was the center of global
energy governance, boasting the world’s largest oil production and even spare capacity to increase
production in emergency. During World War I and II, U.S. oil production played a key strategic role
through stable and additional supply for the United States and its allies. As U.S. oil demand
continued to expand, however, the United States turned a net oil importer with its oil production
slipping below its demand in the first half of the 1960s. In 1973 when the first oil crisis came, theUnited States depended on imports for 37% of its oil demand. Then, the Middle East or theOrganization of the Petroleum Exporting Countries became the gravity center of global oil supply.
Energy price spikes and the subsequent international energy market chaos under the oilcrisis undermined Western industrial countries’ growth model based on abundant, cheap oil supplyfrom the Middle East. As the solidarity of oil-consuming industrial countries collapsed due to theArab oil embargo by oil-producing countries, how to secure stable oil supply topped the agenda at
the first summit of Western industrial democracies that took place in France’s Rambouillet in 1975.
Oil-consuming industrial countries rebuilt their cooperation by creating the International Energy
Agency and implemented oil supply security policies to promote energy conservation, thedevelopment of alternatives to oil, their oil development outside the Middle East or OPEC, and oilstockpiles. Project Independence represented an ambitious U.S. national project to overcome the firstoil crisis.
Later U.S. administrations gave top priority to oil supply security in their energy security
policy while trying to reduce dependence on oil imports. U.S. dependence on oil imports, thoughfalling temporarily thanks to the development of huge oil fields in Alaska, basically continued anuptrend even until the early 21st century. In 2006, the oil import dependence rate came to 66.4%.
Until then, the United States had no choice but to give priority to an energy security policy toaddress oil shortage in the face of the high oil import dependence rate.
“An attempt by any outside force to gain control of the Persian Gulf region will beregarded as an assault on the vital interests of the United States of America, and such an assault will
be repelled by any means necessary, including military force,” stated the Carter Doctrine that thenU.S. President Jimmy Carter announced in January 1980. This indicated how serious the UnitedStates was in prioritizing oil supply security and the Middle East in the face of the second oil crisis
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chaos and the Soviet Union’s invasion into Afghanistan. Following the two oil crises, the UnitedStates perceived the high oil import dependence rate and oil shortage as threats related to nationalpolicy or strategy.
After the national strategy based on the oil shortage perception continued for more than 30years, however, a revolutionary development started to emerge silently to reverse such strategy. That
was the shale revolution.
Massive oil and gas resources in hard shale layers had long been known in the UnitedStates. In the absence of technologies or initiatives to commercially extract and use such resources,
however, shale resources had remained simple underground substances rather than economic goods.
In the early 2000s, however, new technologies for horizontal drilling, hydraulic fracturing andadvanced information technology were combined to break through this situation. As massive shale
resources were turned into economic goods, shale gas production expanded, followed by shale oilproduction. In addition to the new technologies, special U.S. conditions contributed much to sharp
growth in shale gas and oil production. They included numerous small entrepreneurial oil and gas
companies’ proactive shale resources development initiatives, the presence of pipeline networks
since before the shale revolution (that made it easier for shale oil and gas to be provided to themarket) and landowners’ ownership of underground resources (that has served as an incentive forlandowners to develop shale resources).
U.S. oil production bottomed at 6.83 million barrels per day in 2006 and increased 2.5-fold
to 17.07 million bpd in 2019. Natural gas production rose 1.9-fold from the bottom of 489.4 billion
cubic meters in 2005 to 930 billion m3 in 2019. Through the sharp production growth, the UnitedStates has become the world’s largest oil and natural gas producer. The oil import dependence rate
declined remarkably from 66% in 2006 to only 4% in 2020, indicating that the United States almost
attained oil self-sufficiency. The natural gas import dependence rate also declined from 22% in 2005,
allowing the United States to become a net natural gas exporter in 2011. Since 2019, the natural gas
self-sufficiency rate has exceeded 120%, meaning that production is over 20% more than domestic
consumption. Through the shale revolution, the U.S. energy security perception changed
dramatically and naturally. Freed from the constraint of the oil shortage perception, the United States
now bases its energy strategy on the oil abundance perception.
For the United States, benefits from the shale revolution have not been limited to thereduction of the oil import dependence rate. The sharp oil and natural production growth encouraged
investment and employment in oil and gas sectors, and relevant infrastructure industries as well as
consumption, supporting economic growth. Production growth has led to export expansion. The
United States has become a major exporter of liquefied natural gas. The revolution has thus provided
new business opportunities, contributing to economic growth. The production expansion increased
supply pressure on U.S. and other oil markets and brought about a looser international oil
supply-demand balance, becoming a major factor behind the oil price crash from late 2014. In theUnited States, gas production expansion brought about remarkable domestic gas price declines,
leading gas to replace coal as power generation fuel. Subsequent drops in electricity and gas prices
contributed to enhancing U.S. economic and industrial competitiveness. Gas’s replacement of coalalso made contributions to U.S. CO2 emission cuts. In this way, the shale revolution contributed
much to enhancing the United States’ overall national strength.
The previous Trump administration used the term “energy dominance” for its energy
policy. While the word is variously defined and interpreted, it is apparently understood as2

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representing an attempt to take advantage of U.S. oil and gas supply increased through the shale
revolution to maximize U.S. national interests. This means an energy strategy based on oil and gasabundance. The U.S. national strategy to address energy shortage has transitioned to one taking
advantage of energy abundance. The Biden administration has emphasized a priority on climatechange rather than on oil or natural gas. It seems critical of overall fossil fuels. Irrespective ofdifferences with the Republican Trump administration, however, the Democrat Biden administration
might have understood that energy abundance achieved through the shale revolution has supported
the United States’ national power and economy. Becoming free from the constraint of oil shortage,
the United States seemingly can now invest more policy resources in other important agenda. The
perception change from shortage to abundance has driven the United States, exerting great impacts
on the world.

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