With the right regulations and a “common market” among Canada, Mexico and the United States, North America could become the 21st century version of the Middle East for hydrocarbons, a panel of experts from the three nations said Monday at a Manhattan Institute forum.
After decades of focus on potential shortages, North America’s energy landscape has been turned upside down through new technologies that eventually could make the continent the world’s center for the export of oil, natural gas and coal, according to the three panelists and their moderator, Mary Anastasia O’Grady, a Wall Street Journal columnist who characterized it all as a “great paradigm shift that carries some really unique” economic growth opportunities.
Some big economic numbers — trillions of dollars and millions of jobs — were touted by Mark Mills, a private sector capitalist and senior fellow at the Manhattan Institute; John Prato, a former investment banker now the Consul General of Canada in New York City; and Luis de la Calle, managing director of an international economic consulting firm in Mexico City and a former undersecretary of international business in Mexico’s economics ministry.
Mills characterized North America’s full potential for hydrocarbons at six times the overall size of the Middle East resources, contending that technology has “profoundly transformed” the North American energy sector, in which 60-80% of the continent’s future energy can come from hydrocarbons, with 20-40% coming from efficiency and other resources.
These resources have the capability of “powering a renewal of American manufacturing,” said Mills. However, Mills warned that the same technological shifts that have thrust the continent’s energy picture into the 21st century need to be matched by policymakers in Washington, DC. “Imagine if we used the demand and the technology metrics of the 1930s to establish energy policies in America,” he said. “That is what we are doing today as we’re locked in a paradigm that was put into place in the 1970s during the Arab oil embargo.”
In the 1970s the United States was the world’s largest and fastest growing energy consumer. “Today that is no long true,” said Mills, noting that the largest and fastest energy demand now resides outside of North America.
Mills recently co-authored a report which concluded that policies that take advantage of the U.S. fossil fuel energy abundance could spark “widespread employment growth” in many areas of the country (see Daily GPI, Oct. 26).
In the last 10 years, world energy consumption has increased in an amount equal to the total U.S. energy consumption, Mills said. In the next two decades, he predicts that global energy consumption will increase by an amount equal to the consumption of two North Americas. “All of that consumption is occurring almost entirely outside of North America.”
“This is an extremely positive news story,” said Canada’s Prato, who worked for 20 years in the Canadian investment sector before assuming his diplomatic position. He said to understand energy in Canada it is important to recognize that the U.S.-Canada trading partnership is the largest of its kind in the world, equating to $680 billion and 7-8 million jobs annually.
“Thirty-five of the 50 states call Canada their number one exporter,” said Prato, noting that energy is the key component of the two nations’ trading. He said Canada still exports $100 billion in energy annually to the United States.
Less bullish was the presentation on Mexico, although all of the panelists agreed that if the new Mexican government can begin to free up the energy market and loosen national oil/gas company Pemex’s monopoly control on setting prices, the opportunity for North America to emerge around the world will have a better chance of becoming a reality.
“We will see an industrial renaissance in the United States — not because there is a reindustrialization of plants, but because there are market forces that will make a growing sector in the U.S.,” De la Calle said. “One of the reasons for that happening is the energy revolution. Mexico has become North America’s industrial platform.”
Mexico is projected to surpass China as the largest supplier of manufactured goods to the United States, De la Calle said. “We’ve already surpassed Canada.”
Ironically, he said that the country that might benefit the most from the North American energy revolution is Mexico, “but the country that is most likely to miss the boat is also Mexico.” De la Calle said Mexico’s people and government must be “willing to pay the cost to make the changes necessary to become a developed country in the next 30 years.”
Part of that would mean freeing up Mexico’s energy markets, he emphasized.
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