international analysis and commentary

The energy promises of Mr. Obama: a mixed assessment

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In his inaugural address, President Obama warned the American people against the current patterns of energy consumption which “strengthen our adversaries and threaten our planet”, and invoked the need to stop “consum[ing] the world’s resources without regard to effect”. This new attitude would benefit those who cannot participate in such bonanza, including the next generations of Americans. However wise, though, Mr. Obama’s electoral promises in the energy field have not struck industry experts, who tend to emphasize a certain continuity with the strategic framework already adopted by the Bush administration: more energy efficiency in order to contain demand, and a supply strategy based on source diversification, through the introduction of short and medium term goals for renewables, coupled with the search of a higher degree of energy autarchy on the hydrocarbons side.

Even accepting that a part of this approach might already have been in place before Mr. Obama – which, at any rate, tells a lot about the stable nature of American politics – it is necessary to make two important distinctions, one on the big picture and one on detail. Their combination will reveal why, compared to his predecessor, Mr. Obama has many more chances of success in fulfilling his promises.

As for the big picture, the most apparent element is a change of tones, which presents energy objectives – especially those related to the environment – as a measure of respect for the planet which all mankind inhabits, rather than simply as a national policy against the risks related to dealing with certain producing countries. The latter concern has not disappeared – as probably reflected in the efforts to cultivate a key country like Turkey – but overall President Obama seems more serious than his predecessor about going green and figuring out how to secure most supplies at home rather than abroad.

If the most frequent question of the neo-con era was “what interests stand behind these claims?”, then the current President comes across as a pragmatic idealist, and his own ideas in the energy field are certainly open-minded. Policy substance is a somewhat different matter, though: critics from all sides have already pointed out that energy self-sufficiency, and a certain tendency to protectionism in general, do not completely fit with the picture of Mr. Obama as a fervent supporter of multilateralism, or as a “dove”. At the same time, his efforts in the direction of saving the American automotive industry during the financial crisis, coupled with the limited action taken on the nationalization of banks and financial institutions, demonstrate that even he cannot escape a certain degree of dependency from vested interests. But oftentimes something as virtual as public image is enough to bring about real change, insofar as it shapes market expectations and therefore helps channel investment in a certain direction: Mr. Obama has well understood this feature of politics.

As for the details, looking back to the electoral promises, the first had been to promote the self-sufficiency of the United States from energy imports. This has nothing to do with the reckless protectionism of the “Buy American” slogan, which upset many foreign observers during the first month of the presidency. Rather, it is an action on the domestic side, mainly aimed at two objectives: making the best use of domestic resources thanks to the so-called “use it or lose it” principle which would bring the many unused exploration licences back to the market; and being able to tap from the strategic oil reserves in times of crisis. The second spot in the priority ranking was occupied by renewables. Mr. Obama’s goal is to introduce them in the energy mix, reaching 10% by the end of his mandate, and 25% by 2025. Furthermore, in terms of emissions and the restriction thereof, the new President committed to re-enter the multilateral dialogue, which the US abandoned since the missed ratification of the Kyoto protocol, to develop the technology of carbon capture and storage, and to promote energy efficiency. The single point which is lagging behind is nuclear energy, upon which many doubts still remain: it was clear from the start that Mr. Obama and his team are just as concerned with the necessity of developing nuclear energy as they are afraid of the danger of proliferation. Although the expression “rogue states” seems to have disappeared from the US foreign policy vocabulary, the fact remains that the spread of nuclear know-how to unreliable countries is a serious concern.

It would have been unrealistic to expect dreamy results in a mere three months, but many ideas remain on paper and some important initiatives are still missing altogether. Most striking for its absence is an effort to convert the strategic reserves from crude to derivatives, which would avoid the possibility that a shock affecting the country’s refining potential (such as hurricane Katrina in 2005) might make non-refined stocks unusable. Equally odd is the absence of concrete guidelines on how the United States intends to cooperate in the international framework, considering the upcoming Copenhagen conference in December. An additional question mark is how the renewables targets will be met in terms of business reorganization: investing in the creation of professional expertise today means shifting human resources that companies will not fully use for five or perhaps ten years. Lastly, potentially controversial decisions will have to be made on the issue of biofuels, after the world economy discovered the correlation with growing food prices, carbon emissions, and even water reserves.

In any case, there are extraordinary similarities between the US administration’s priorities and the climate package approved by the European Council last December – which strengthens the perception of Obama as a “European” president. On a broader level, the West may finally take some serious steps towards cooperation in the energy sector, traditionally characterized by a fierce battle for resources which has also had the effect of damaging the prospects for development in parts of the world.

The first tangible test of the new President’s influence on energy politics will be in a region geographically closer to the European rather than the American shores: the outcome of the current diplomatic battle for the construction of a pipeline bringing Caucasian natural gas to the European border (or alternatively the sale of that gas to Russia). This test will be pivotal in defining whether the West is willing and able to break the old curse according to which the discovery of hydrocarbons tends to wreck a country’s path towards economic development rather than help it. Turkey, Georgia, Azerbaijan, later possibly Turkmenistan and Iraq, and one day even Iran: if these countries will be able to benefit from their role in the process of bringing hydrocarbons to the world markets, then Mr. Obama’s energy multilateralism will have been meaningful.