As President Joe Biden walked through the doors of the Oval Office last year, high on his agenda was bringing some normalcy to the country’s increasingly contentious relations with military superpower Russia. After all, he had sought to calm nerves by touting all throughout the campaign his decades of foreign affairs experience to restore the geopolitical US-based order and deal with the many headwinds prevailing in the run up to the elections.
In any negotiation, the party with more levers to pull usually has an upper hand. In addition to the might of economic and financial sanctions, and a firm backing of western allies, any move by the US administration against Russia was to be bolstered by another lever – and one which had only grown stronger over the years – energy. As a resurgent energy superpower, the Biden administration had enough clout to convince its audience at home and abroad, particularly in Europe, that the US could help blunt the impact of the one major pain that nations could face in the event the oil and gas spigots are turned off or supply is critically reduced. A climb to the league of the world’s top oil producers and a rapid expansion in gas exports meant the US could lean less on its oil- and gas-rich allies in the Middle East to talk up their spare capacity to reassure markets and consumers of a quick fill-up in the gap, if such a situation ever arose.
One year on – and with the confrontation along the Ukraine/Russia border potentially coming to a head – the math hasn’t quite played out. At home, elevated pump prices are dominating the headlines, and runaway inflation rates already at multi-decade highs look set to accelerate further as supply chains struggle to cope with a spurt in energy demand. With looming mid-term elections, and the control of both the Senate and the House of Representatives at stake, that energy dynamic is seeing a near complete reversal, triggering talk from Washington of ill-conceived moves like a reestablishment of a ban on US crude exports. Global gas prices have surged past recent peaks as Europe sucks in higher volumes, potentially irking some of the US’ existing clients in the region and in Asia – mostly all emerging nations that are already dealing with their own battles of rising costs and public discontent. On top of all this, a crisis brewing thousands of miles away risks derailing a domestic agenda that was perhaps closest to the heart – the energy transition. -Rystad Energy
Also published on Medium.
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