ENERGY ‘ REVOLUTION’ A NORTH AMERICAN CATALYST
Revolutions — from military to social to technological — have altered the course of history as they change the prevailing political dynamic.
The “fracking/ shale revolution” that has transformed the oil and gas world in the past decade has profoundly altered the outlook for energy in the United States — the world’s largest consumer and now a resurgent and increasingly influential producer. The most significant energy transformation in North America since the oil shocks of the 1970s is also touted as the potential catalyst to reinvigorate stalled efforts to increase economic integration.
“Energy is a potential gamechanger on many levels,” says Robert Zoellick, a former president of the World Bank and now the chairman of Goldman Sachs International Advisors. “The change in energy, in all three countries, is the principle force in driving change to re- look at this.”
Zoellick and David Petraeus, the former CIA director and four- star general in the U. S. army, co- chaired a task force for the U. S.- based Council on Foreign Relations which issued a report last October titled North America: A Time For A New Focus that calls for closer ties between Canada, the United States and Mexico.
The two will be in Calgary on Thursday with Canadian and Mexican representatives for a session with a blue- chip business audience titled A Discussion on The Future of North America sponsored by the Canada West Foundation and the U. S.- based Center for a Free Secure Society.
Canada, Mexico, and the U. S. are already highly integrated countries with more than $ 1 trillion US in cross- border commerce annually. One of the report’s themes is that further regional integration will help North America be more effective globally on shared issues. It also calls for a unified energy strategy between the three countries that are home to 500 million people.
“It’s time to put North America at the forefront of U. S. policy,” urges the report, that calls on Washington to approve Keystone XL pipeline.
The stalled final leg of the pipeline from the oilsands and other energy, economic and environmental issues by the signatories of the 1994 North American Free Trade Agreement — the three agreed in May to work jointly to address climate change — will be up for discussion at Thursday’s invitation- only event.
In advance of the event, Zoellick and Petraeus spoke with the Herald about the call for a unified continental strategy in a changing word. Following are excerpts from those interviews:
When Robert Zoellick discusses the differences in political sensibilities of the NDP in Ontario and the prairie provinces, his knowledge and global perspective is apparent given his extraordinary career in banking and government.
When he explains how Kazakhstan wanted to emulate Canada as an energy producer ( large producer next to huge market) it’s evident he’s seen enough farflung corners of the globe to once state: “There are many roads to prosperity, but one must be taken. Inaction leads nowhere.”
Zoellick is currently chairman of Goldman Sachs’ International Advisors and serves on the boards of several companies and philanthropic organizations. He’s also senior fellow at Havard’s Belfer Center for Science and International Affairs.
He was president of the World Bank Group from 2007 to 2012 after a career in government that culminated as U. S. Trade Representative under President George W. Bush. He has advanced degrees from both Harvard law school and the university’s Kennedy School of Government.
Five Questions
Q Is the era of globalization giving way to a world with regional trading blocks?
A Years ago there was this view of the world that is either global, or breaks into regional blocks. I don’t think it’s one or the other and in fact the idea of the report is that if you have deeper regional integration you will be more effective in a global environment.
With regard to the United States you hear a lot of talk about this “pivot to Asia,” but the reality is the United States can’t be absent from any region of the world whether it is the Middle East, whether it’s Europe or Asia. We will actually have greater capabilities economically, politically and with human terms with stronger partnerships in North America.
Q How far can North American political and economic integration go?
A There is an opportunity for deeper economic integration while recognizing these three countries, for historical reasons, have a very strong sense of sovereignty and independence. Unlike the European model, which is trying to share sovereignty through the European Union. That would never work in North America.
The question is how do we get the benefits of integration but also have a model that respects national sovereignty? Frankly, what could also be a model here is that I don’t know of another model for deep potential integration between developing and developed countries.
Q What role will energy play in North American integration?
A The changes in energy in all three countries is the principle force that can drive a re- look at this issue and it’s not an energy independence issue because we’re still talking about global oil prices but there is no doubt you have potential self- sufficiency. I do think that energy is a potential game- changer on a number of fronts ... we’ve got to take advantage of this.
Q Why is a continental approach such a challenge in North America?
A What we have seen in North America is that if you do have a high- level commitment that can help drive the system. We saw it with Mulroney, Reagan and Bush. And we’ve seen it with Bush and Clinton over Mexico. You do need to have the top level.
It won’t just happen if you take it for granted. Part of our point is to be successful at integration, the U. S. in particular must be sensitive to realizing the sense of sovereignty in Canada and Mexico is very strong and we should understand that because it’s pretty strong in the United States, too.
Q Can a regional block approach work on issues like the UN climate talks?
A I would say that one of the lessons of the climate change negotiations is that the concept that you are going to get 195 countries to agree to 100 different items in one magnum plan just isn’t likely to be successful. The Copenhagen talks were one of the most striking examples of that. When I was at the World Bank, former president Calderon of Mexico hosted climate change talks in Cancun and we worked on what we called the ‘ building block’ approach.”
As we approach the Paris meeting ( in December). I think we will see this more. If you can get the core countries to agree on energy efficiency, or avoided deforestation, or soil carbon, or various adaptation policies, or technology polices frankly you don’t need 195 countries to agree to everything. The issue is, can you get core countries to start to demonstrate a common interest in these things and build momentum?
DAVID PETRAEUS
David Petraeus has made the transition to “civvy street” after four decades in the military so successfully he jokingly refers to public speaking engagements as “the highest form of white- collar crime in America.”
The former commander of U. S. forces in Afghanistan and Iraq and director of the CIA — who left government after an extramarital affair with his biographer became public — is now chairman of KKR Global Institute, part of New York- based private equity giant Kohlberg Kravis Roberts & Co.
Petraeus is a senior fellow at Harvard’s Belfer Center for Science and International Affairs as well as teaching at City University of New York and the University of Southern California. He’s known in the media primarily for his insight on military matters but Petraeus developed the course he teaches at CUNY titled The North American Decades.
He cautions opportunities for North American prosperity “won’t just happen if you take it for granted.”
Petraeus has a PhD in international relations from Princeton University and was a top graduate from the U. S. Military Academy and U. S. Army Command and General Staff College.
Five Questions:
Q Why did the shale revolution take place in the United States?
A We are lucky to have shale with oil and gas in it. We’re lucky to have water near it because it’s a liquid- intensive process but beyond that it’s not just serendipity and good luck. We invented the technologies that enable this — horizontal, directional drilling to stay in the shale, hydraulic fracturing to open the rock and the seismic ‘ big data’ capabilities in the IT world to determine where that shale is and stay in it when you are drilling. We have lot of companies that could build that out, we have capital markets that can move quickly and fund these companies, we have property rights that allow those who own land to sell the mineral rights underneath them. We have a pretty good infrastructure system for pushing oil and gas around the country, could always be better, but it’s actually not bad.
You can’t find those same factors anywhere else in the world. If you could, China would be leading the world in additional production.
Q How would we go about updating the NAFTA agreement?
A Obviously there are new issues to be tackled. When NAFTA was established there was no sense of where is the Internet going to go and some of these developments that are just breathtaking and weren’t envisioned in the original agreement.
NAFTA is a bit of lightning rod at time and the special interest groups have had their way with it at various moments. So you just wonder is that the best way to go about this. I’m not so sure that the process isn’t best facilitated by government- to- government executive agreements and practices. A lot of the framework is there and I think you can go about it another way that doesn’t necessarily require a rewrite of something that might require a contentious process of getting the treaty approved ... it’s a political reality.
Q How did you become interested in the topic of North American integration?
A I really develop this ‘ North American thesis’ while I was the director of the CIA and we stumbled into the energy revolution as we were trying to predict the price of Brent crude oil after sanctions on Iran came off. I kept piecing together other elements of the decade — the revolutions in IT, life sciences, manufacturing and energy and frankly the thesis has proven out.
Q Has energy abundance changed the geopolitical out
look for the United States?
A It’s a realization that’s dawning. But you almost have to be careful sometimes not to take that too far. I travel frequently to the ( Persian) Gulf region and the Gulf states constantly ask, ‘ Will you still care about us when you are more independent?’, and the answer is ‘ absolutely.’ It is still absolutely vital to the United States that oil coming out of the Persian Gulf can transit freely to Asia and Europe because that oil fuels our biggest trading partners outside of North America.
Q How has your perspective on the world changed since you’ve been out of the military?
A I don’t think my perspective on countries has changed that much. One of the big takeaways is that I’ve come to see there are certain sectors of the financial community I tend to think are serving the country about as much as some of us did in uniform, without overstating it too much. I will probably get some push back on that ... but it’s the market forces and market discipline.