Is North America the New Saudi Arabia?

Last week, New America’s Future Tense program hosted an event
with a provocative title: is North America the new Saudi Arabia? I’ve been
pondering that question ever since and have come to the conclusion that the
answer is pretty straightforward: no.

That is not, however, for lack of fossil fuels. Today, the United
States is the single largest producer of oil (Saudi Arabia is second), and the
second largest producer of natural gas. Canada is number five and two
respectively, and Mexico is number 12 and 10. In 2013, the U.S. Department of
Energy estimated that Canada would have 165
years of oil production left, thanks to oil sands, while Saudi Arabia would
only have 76 (the United States has 11). North America is estimated
to have 12.8 years of natural gas at current production rates, compared to
Saudi Arabia’s 75. So, Saudi Arabia ultimately has more staying power, but even
with oil sands, it is worth considering that the North American nations
apparently do not want to be the new Saudi Arabia.

In December 2015, 195 countries committed in Paris to significant
reductions of greenhouse gas emissions, which by definition means a commitment
to clean energy. That transition will, of course, be much harder for some
countries than for others: South Korea, for example, is 97% reliant on fossil
fuel imports for its primary energy consumption. On the flip slide, oil
accounts for 95% of Nigeria’s export earnings, and, more to the point, it
accounts for 97% of Saudi Arabia’s and more than 50% of their GDP.

In June 2016, however, three of the world’s top oil and gas-producing
countries bucked the trend, agreeing
to move toward 50% clean energy power generation by 2030: the United States,
Canada, and Mexico. They also made some commitments to promoting vehicle energy
efficiency. (Note, though, that the heads of states, the so-called “three
amigos,” did not pledge to stop producing or exporting fossil fuels, just to
change their own domestic consumption patterns. It’s not nothing, but it’s not
everything, either.)

The transition to clean energy will not be easy for any nation, but
it will without a doubt be harder for some than others. This is a lighter lift
for Canada, for example, which is only 65% dependent on fossil fuels for its
primary energy consumption (the nation is blessed with hydropower resources), while
the United States 81% dependent, and Mexico, 92% dependent.

In some cases, it’s not a national challenge at all: more than
half of all clean
energy investment in Canada went to Ontario Province in 2015, for example. In
the United States, energy is highly regionalized: consider that Washington
State gets about 75% of its electricity from hydropower, whereas Kentucky gets 87%
of its power from coal. In Mexico, the Federal government owns both mineral
wealth and the means of energy production, transmission, and distribution, so while
there may still be local
challenges, they seem less germane in shaping national policy. And while there’s
a long history of regional oil and gas trade, it is the interconnectedness of
the electrical grid that holds out the most hope for speeding the diffusion of
clean energy. The United States and Canada are already highly connected, but
Mexico’s grid does not extend across the border. Ultimately, though, North
America’s clean energy success depends squarely on progress in the United
States, given that total U.S. energy demand dwarfs that of both its neighbors
combined.   

To be fair, even Saudi Arabia doesn’t want to be Saudi Arabia
anymore. The country’s new “Vision 2030”
has set ambitious goals, too, seeking to diversify the economy, improve energy
efficiency, increase innovation, and promote the adoption of renewable energy.
It remains to be seen if the Deputy Crown Prince can actually implement his
vision, as both a political and a practical matter, but at least he has a plan.
Nonetheless, one thing is for sure: Saudi Arabia will not be the next North
America. Collectively, the United States, Canada, and Mexico have a big head
start in the future energy economy.