Why Do Some US Local Public Officials Support Foreign State-Owned Energy Companies Over American Interests?
Russia’s invasion of Ukraine delivered a wake-up that energy security is core to national security.
European allies relied too heavily on energy imports from Russia. Global commerce delivers huge economic benefits and generally peace between commercial partners, but it becomes dangerous when unfriendly nations use energy dominance to exert political leverage over their neighbors. Energy, as evidenced by Russia, can be a sword; the U.S. must use it as a shield.
We have seen this script before: in the 1970s, U.S. energy producers could not meet domestic demand, and our country depended on imports to fill the supply gap. Between the 1970s and the late 2000s, imports as a percentage of consumption ranged between 21 and 51%, but peaked in 2005 at more than 60%. Now, due in large part to the shale and oil gas revolution of the last 15 years, the U.S. is enjoying an “energy renaissance.” Production has boomed, thousands of jobs have been created, we are less reliant on foreign producers, and have a stronger economy and greater national security to show for it.
Against this backdrop, it is puzzling that elected leaders in some two dozen states and municipalities are trying to make U.S. and European energy producers liable in court for climate change. The whole world, certainly including foreign energy companies, has contributed to climate change. But these leaders want U.S. and European energy companies — not foreign state-owned energy producers — to pay. The result, as they freely admit, is to make U.S. and European energy producers massively increase prices so they can pay damages, or go out of business. According to a lawyer representing the Colorado communities, the goal is to drive prices up at the pump and make household electric bills even higher.
But America’s adversaries — who are not targeted defendants in these lawsuits — will not have to bear these costs. U.S. public officials championing these lawsuits neglect to point any blame on foreign state-owned energy companies like Russia’s Gazprom, Saudi Arabia’s Aramco, and Venezuela’s Petroleos de Venezuela. Yet these foreign companies’ fuels are far more carbon-intensive and more harmful in the global fight against climate change.
Putting huge burdens on U.S. and European energy producers, but not on firms hostile or indifferent to American interests, will create a dangerous situation for the U.S. If plaintiffs succeed, there will be no reduction in global fossil fuel production. Instead, if the Western world reduces production as a result of these lawsuits, production will shift abroad to fill the supply gap.
Outsourcing U.S. energy capability will make our country much less secure. Last October OPEC countries said they are happy to increase fossil fuel production as American, European, and Canadian suppliers reduce production over climate concerns. It makes no economic sense to hamstring production among Western allies if it has no impact on global climate change. Fuel will still be produced -- just by adversaries and indifferent countries.
Energy analyst Michael Lynch projected foreign-owned energy companies within OPEC will increase their share of the global oil and gas market from 55% to 75% by 2040. That outcome, if realized, would lead to adverse future national security implications. If litigation succeeds, we risk having a hostile foreign country increase its leverage over us through another Iranian or Arab oil crisis.
American politicians should reconsider before endorsing these lawsuits. Successful litigation will drive up energy prices, worsen the global fight against climate change, and compromise the security of Western allies. This is a lose-lose proposition. It hurts our economy and our national security. The harm to American interests is too great for the money grab behind these suits.
Driving up energy prices and making us more dependent on foreign energy is not the answer.
Gary Clyde Hufbauer is a senior fellow at the Peterson Institute for International Economics
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