Energy and foreign policy expert Meghan O’Sullivan addresses the crowd at the recent Marcellus-Utica Midstream Conference in Pittsburgh. Source: Hart Energy
PITTSBURGH—Meghan O’Sullivan doesn’t mind admitting to a room full of oil and gas executives that she’s been having an identity crisis. But she’s also quick to point out that many of those very same executives are enduring a similar conflict.
O’Sullivan, Jeane Kirkpatrick Professor of the Practice of International Affairs and the Director of the Geopolitics of Energy Project at Harvard University’s Kennedy School, has spent the last 25 years working with U.S. foreign policy leaders. During the last 12 years, she has added the duties of working with energy leaders.
“The overlap between the energy world and the foreign policy world is surprisingly small,” the former special assistant to President George W. Bush and deputy national security adviser for Iraq and Afghanistan told an audience of about 1,000 attendees during a special address at the recent Marcellus-Utica Midstream Conference.
“I’ve asked myself: Why do so few people wear a foreign policy lens and an energy market lens when they’re trying to understand the situations in the world today,” O’Sullivan, author of the recently published, “Windfall: How the New Energy Abundance Upends Global Politics and Strengthens America’s Power,” said. “It’s a natural tendency for every single one of us to put weight on the things we understand and to discount the things we don’t.”
In today’s world where the interplay between energy market dynamics and foreign policy is almost seamless, O’Sullivan said the understanding of both points of view is instrumental to the industry continuing to make progress around the globe.
“Given all of the changes in energy markets and global causes that we’re hearing about, I believe that you have to wear both of these lenses if you want to understand the past, if you want to take advantage of the present, and if you want to plan for the future,” she said.
O’Sullivan said that looking at geopolitical events through a foreign policy lens or an energy lens alone can lead to differing outcomes. To illustrate her point, she cited an experience from her past as part of the Bush administration when she accompanied then-Secretary of State Condoleezza Rice to Egypt for a meeting with Saudi Foreign Minister Saud al-Faisal.
“We were trying to convince him of the importance of Saudi Arabia supporting Iraq. … This man met our pleas with a stream sectarian rhetoric. We left a little disappointed; not entirely surprised,” she recalled. “But what if I had been wearing my energy lens at the time? I would have gone into that meeting knowing the challenge the Iraqis were posing to the Saudis wasn’t just sectarian. It was that the Iraqis were, for the first time since the 1970s, talking about opening up their [oil] fields and industry to foreign investment.
“This was a direct challenge to the Saudis,” she continued. “Had I gone into that meeting with an energy lens, I might have prepared Secretary Rice differently for that meeting.”
But that was the past. In the present, O’Sullivan said the interplay between the two lenses is even more essential.
“In the foreign policy world it is still fairly common to hear people say that the energy independence that we hear a lot about is going to deliver the United States from its really complex, difficult and costly entanglements in the Middle East,” she said. “Then you’ll hear from Americans who look at statistics and say America is on the verge of producing more oil than it ever has and this is going to deliver the U.S. energy independence from the Middle East,” she said. “Now, you can only make that argument if you’re not wearing a market lens.
“We are connected to the global market and as long as we are, it doesn’t matter if we are importing Saudi oil, Iranian or Iraqi oil,” she continued. “What happens in those countries matters to the overall stability of the market and therefore it matters to the U.S. and U.S. consumers.”
She also pointed to lower-for-longer oil prices and a common belief that those prices will be devastating for the Middle East.
“We might actually be looking at a future where the world is still consuming oil but at a lower cost, and it is high-cost producers that will be pushed out. So a greater percentage of what the world consumes, in fact, comes from the Middle East,” she said.
O’Sullivan also warned that if we don’t pay attention to both lenses, we might miss the effects of this energy boom on issues such as Russian oil exports and the environment.
“We are all aware of the tensions between maximizing production and protecting the environment,” she said. “I think there is a very sensible discussion to be had along these lines. There is the whole question of where the right place for regulation is.”
She said that using both lenses allows everyone to see that there is more to the environment discussion than meets the eye.
“We’re used to thinking about the ‘substitution effect’ where the expansion of natural gas must mean less of a consumption of solar or wind,” she said. “We rarely hear people talk about the counter factual. What if we were still living in a world where energy prices were so high? In that world, what environmental issues would we be dealing with?”
She pointed out that we need to think about what the future energy mix is going to be and what impact that is going to have on the world we live in.
“So my macro-thesis is pretty simple: there’s a big change in energy, energy markets, or energy mix, so we should expect a big change in global politics,” she said.