By Oren Laurent
President, Banc De Binary
Last Monday, US President Barack Obama named two additions to his cabinet whose responsibility will be to manage climate change and energy policy if Congress fails to act quickly. It is abundantly clear now that in his second term, Obama, free from the political pressures of re-election, is taking the energy issue seriously. According to White House spokesman Clark Stevens, “enhancing energy security will be among his top priorities.”
This is no easy task. The President has advocated the importance of greener environmental choices and wants America to lead on this front. At the same time, he will have to balance the concern that the country could risk falling behind in the industry and manufacturing sectors if it fails to meet the high demand for energy. Factor in too the country’s desire to become less dependent on foreign oil and to boost the American economy and job market, and Obama certainly has his work cut out.
It is difficult to be sure so early on what exact targets he will set and meet. However, if the two cabinet appointments and their previous activities are anything to go by, we can expect America to invest in renewables and up its own natural gas output. McCarthy, an experienced clean air regulator, will take the helm at the Environmental Protection Agency, and Moniz, a physicist and known advocate for natural gas and nuclear power, will run the Department of Energy.
So far, the boom in natural gas production has brought America lower energy prices and reduced carbon emissions. Arguably, the production of natural gas through hydraulic fracturing presents certain environmental challenges, and for many environmentalists this prevents natural gas from being a satisfactory long-term energy solution. However, the President hasn’t yet been deterred. New and more stringent fuel efficiency standards finalised in August include incentives to spur the production of natural gas-powered cars through 2025.
Working towards American self-sufficiency, Obama is also encouraging oil production. Wary of constantly bubbling political tensions in the Middle East and Africa, the American superpower is understandably reluctant to be so reliant on oil imports from these areas. Plus it is keen to create jobs and economic opportunity in the process. Indeed the output of crude and other liquid petroleum products in the US is set to rise more than 80% through 2020.
The rest of the world needs to be taking note. For so long, countries have vowed to invest in cleaner energies and reduce greenhouse gas emissions, and many have discussed ways to become more energy independent. Yet action has been slow. No one wants to be the first to fall behind and hinder their productivity by changing the status quo.
If America does indeed manage its energy more efficiently, which is now looking as likely as ever, this marks a significant change in attitude. Yet it could be as hard to follow as to lead. Oil is the world’s most traded commodity and America is one of the largest users of this black gold. A reduction in demand for oil from America could potentially reduce import prices for other countries. That would also reduce the incentive to find alternatives.
That doesn’t mean we can afford to be complacent though. Should tensions flare in the Arab world and oil becomes a precious commodity, the countries who have taken significant measures to become self-sufficient will be in the strongest position. Energy independence and greener energy are at times contradictory, as America’s increased oil output shows. However, they are both essential parts of the energy plan for decades ahead. It is necessary for governments to stop just talking and to tackle these two issues together and head on. The sooner, the better.
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