Energy power struggle

Many are foreseeing an upcoming struggle for dominance between the U.S. and China in the energy area. Only this week, critics of the Biden administration demanded Biden to reverse course on the White House’s pause on new liquified natural gas (LNG) export approvals. The Biden administration linked the paus to concerns about climate change. There have been several other instances where the Biden administration has been reluctant to support oil and gas exploration and expansion. Instead, Biden has focused on green energy with a 30% increase in funding for clean energy research and development. Biden has also ordered the amount of energy produced from offshore wind turbines to double by 2030.

Republicans are critical and mean that the Biden green energy agenda means that the U.S. is not fully capitalizing on the country’s abundant natural resources. They say it also impacts the U.S. national security. Antagonists like China, Russia, Iran and Venezuela have grown relatively strongly the last couple of years. Saudi Arabia, the de facto head of the OPEC and historically a close U.S. ally, is increasingly moving out of America’s orbit of influence and into the arms of China and Russia primarily due to fundamental differences in energy policy. Irate with Biden’s push for a rapid energy transition away from oil, Saudi Arabia has voluntarily slashed its oil production to make room for resilient Russian volumes and to keep oil prices high.

China is meanwhile feasting on cheap Russian oil, which Russia discounted heavily to attract alternative buyers after Europe enacted its oil embargo. Beijing is seizing on the situation to build up its crude inventories in the short term to improve its energy security while continuing to extend its global lead in clean energy manufacturing in areas like solar panels, wind turbines, electric vehicles, and batteries.

The conflict in Ukraine has significantly change the global energy picture. China, Russia and Saudi Arabia have become closer. At the same time, Europe and the U.S. have become closer. The U.S. produced a record 13.1 million barrels a day of oil and 112 billion cubic feet per day of natural gas in 2023. When Europeans, the globe’s most prominent climate activists, lost access to their biggest supplier of gas and oil in Russia, they turned to the U.S. and export rose significantly.

The U.S. has the opportunity to be that critical exporter to other markets worldwide, particularly emerging markets in Asia, over the coming decades. Global oil demand, even under the most bearish forecast by the International Energy Agency, will remain strong through mid-century. Longer term, the battle to get humanity off fossil fuels towards new energy transition will certainly continue and intensify. This transformation will require critical minerals such as lithium, cobalt and copper and be made available for new energy usage.

Environmentalist is keeping a close watch on the exploration of new energy sources. The Pebble Mine in Alaska united many against its potential to destroy vulnerable wetlands. In South Carolina, plans to build a mine would have required the removal of a cemetery for veterans from the revolutionary and civil wars.

There are also the byzantine ad often arbitrary regulatory processes mining concerns combined with politicians jockeying for votes. The Biden administration is also reluctant to issue new mining approvals. As a matter of fact, no new mines for lithium, copper, cobalt, or any of the other materials critical to American energy transition have been approved by the Biden administration. So how can there be a transition to green energy if there is no willingness to get the essential minerals?

These are all areas where China is expanding, and China basically owns the entire rare-earth mineral industry. As this is the basis for a green economy, it is clear that the U.S. does not have a clear strategy of how to actually support its future visionary green energy plan. It seems that the greener the U.S. becomes, the more the dependency on China will grow. This certainly suits China’s economic and geopolitical goals and would mean a significant future shift in global energy power in particular, and global power in general.

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