 I'm Rachel White. I'm Senior Vice President of New America and Director of New America Live. I'm going to introduce our next conversation. But before I do that, I want to thank everyone in this room who's tweeting. We're trending in DC. So keep it up. Our next goal is trending on Twitter. So hashtag 10 big ideas. And I will give it all to you for that. The next conversation is Shale Game. Why geopolitics of energy still matter in America? And it's a great pleasure to welcome two of our own from New America. One, a colleague, Steve Levine, who's been with us for a couple of years as a senior fellow. And also Sharon Burke, who just literally joined New America at the beginning of this week. Sharon was someone we had in mind for this conversation before she joined New America and in the way that things tend to work out for us. She's now an employee of New America. Sharon was, until just last week, Assistant Secretary of Defense for Operational Energy. And she was in the department for four years. That's a long time to be in the department. And she came with a lot of big ideas into New America. Steve Levine has been a fellow with us now for about three years. He's a Washington correspondent for courts and wrote The Oil and the Glory and Putin's Labyrinth. It has a terrific book coming out about the race for the next great battery. I'm not sure when that comes out pretty soon. So please, I hope they're coming to the stage. And they are. So please welcome them. Thank you, Rachel. Well, it really is a delight to be here. I'm glad to be part of the New America Foundation. And we're just going to start out. I'm going to say a few things. And then Steve and I will get in a conversation. And hopefully, maybe we'll include anybody who wants to be included. First, when we set the title for this as Shale Game, I didn't want to imply that there's something phony about what's happening with American energy. It's definitely very real. So let me just start by throwing out a couple of numbers about just how much has changed. Just less than 10 years ago, this country was importing 60% of its oil or their amounts. Now, we're below 40% and the Energy Information Administration just put out numbers that they expect will be at 25% by 2016. That is just a huge change that we're increasingly looking to our own resources. When it comes to shale gas, the US Geological Survey put out some numbers. Between 2005 and 2013, their estimates of recoverable resources in that area jumped 688%. So this is a huge change for the United States, the amount of oil and gas that we're recovering domestically and what it means for our economy. So the big idea here is really, to some degree, a big question. What does this mean? What does this mean for this country? So I'm just going to talk very briefly about what I think it means and what it doesn't mean. And then Steve and I will have a discussion about it. What it means, it means some good things. It means that a friend of mine, Drew Erdman at McKinsey, was showing me some of their numbers. It means that between now and 2020 every year, it means an additional amount of economic growth, which, given our last presentation, in that time period between now and 2020, 1.7 million additional jobs according to their numbers. It means a better trade balance. It means manufacturing, they see, is already seeing some return in the United States because our energy costs are relatively lower. So there are very real positive gains here. It means some strategic gains. Countries that we were dependent on in the past for our energy imports were not dependent on anymore. So that means a lot of good things. But I can tell you one thing it doesn't mean is it doesn't mean we are energy-independent. And you will hear that a lot. We are not. The same projections that look out to 2040 say that we'll be, by 2016, 25% imports. That's still 25% of our oil that we depend on the rest of the world directly for. That'll rise again to, in the 30s, by 2040. Thank you. Yes, I was fading in out there, but I can shout if I have to. So we're part of a global market and that price is set in the global market. That's gonna continue to be the case. Not only that, we're a global economy. We're a trade-based economy. So what our partners pay for oil and gas is also gonna affect our economy. And again, this is a global market. Supply and demand is set all over the world and demand for energy between now and 2030, 2040 is growing very fast. We expect to see, again, the Department of Energy projects something like a 56% increase in demand over that time period, mostly in China and India. This is not bad news. This is hundreds of millions of people being lifted out of poverty, but it is demand for these resources. And right now, today, 80% of the global economy, of the energy in the global economy is fossil fuels, coal, oil and gas. And the Department of Energy projects that will still be the case in 2040. So this is part of a global picture that we're looking at. And what does that mean for us? That we're not gonna be energy independent. We're gonna be part of this global picture. It means there are two predominant risks that will continue to be a problem. One is short-term disruption risks. Oil, gas, it's famous, there's a resource curse. Most countries in the world that are blessed with these resources also are cursed with the influence they have on your politics and your economy. They tend to bring instability with them. They tend to undermine the rest of your productive capacity. So what does that mean? It means a lot of the producers are unstable. And at any given time, you're seeing risks all over the world of a disruption. Today, we've got very real risks in Libya, in Iraq, in Iran, in Nigeria, Russia. Pretty much name any major producer and there's probably some risk. Venezuela, the senator mentioned, Venezuela's had very high risk for disruption. When those producers leave the market, we will pay the price at the pump in this country no matter how much we're producing. So that short-term risk is still very much there. We don't have a very robust toolkit for dealing with it. We still don't. So when those market disruptions happen, we have a difficult time responding. The longer-term risk is that we have to make a transition in our energy economy. Because part of that global economy is also everybody's gonna pay the price for climate change. There is no distinction made there. We're gonna pay the price too. We have to make a transition both because of the competition for these resources and because of global climate change and the mounting results of that. We have to make a transition to a different kind of energy economy and that requires a sustained investment. So there's a short-term disruption risk and a long-term transition that has to happen. So those are the big questions of what's the big answer. I think this is one of the reasons that I was certainly very pleased to have the opportunity to come to the New America Foundation is that the first thing you have to have to get to the big answer is an honest dialogue because there isn't a big answer. Everybody wants there to be a single solution here, whether it's nuclear power or whatever it is, that for this big problem, there's one answer and if we can just innovate our way out of it, it'll all be done. It's not gonna work that way. So what we really need is to have an honest dialogue about the nature of this challenge and the range of solutions and how we get there from here. And that spans what do the geopolitics of oil mean for this country? How do you get out of this bind? And also on climate change, I think it's been needlessly polarized, this conversation so that you're either for renewables or you're for fossil fuel and for business. It can't be that way if we're really gonna solve this problem because the global economy totally depends on these resources right now. You can't pull them out. There's nothing to substitute at that scale. At the same time, if you don't lay in some kind of future transition, then you're not where you need to be in the future. We need to be able to talk about how to cut emissions but also how to adapt without those things being mutually exclusive. So I think we have to have an honest dialogue. A place like New America Foundation is positioned to do that and it's a pleasure to join them. And with that, I know you have some tough questions lined up for me and I'm looking forward to it. And I'm just gonna ask them back to you. I don't know how tough. Welcome to New America. Thank you. Terrific remarks. I wanna start out by rolling back to some of the subjects that Senator McCain was asked and spoke about and it's in the geopolitics. So Russia is a big petro state and one of the largest in the world and the power that it exerts and is exerting now that we're worried about is its control over the natural gas supply into Europe. In South China Sea, China has put a drilling ship very close to shores claimed by Vietnam. In the first case, it is said in our country that one of the strongest instruments that the United States can use to push Putin back is to use the instruments of oil and gas. Is that true? Is that really a realistic instrument that we would use and can use? And two, in the South China Sea, is China's game oil? Is it putting down that drilling ship to drill for oil or is this a territorial question for it? Yes. I think that energy is a foundational element in politics and in an economy. So whether you have it or you don't have it, energy is gonna be foundational to every element of your economy and it's gonna affect your politics. But it's not an independent variable. So it's usually operating in combination with everything else. So is the oil rig in the South China Sea about territorial by energy? It's about both. And I don't think you can separate them. They do want access to the resources but they also wanna make a territorial claim. So one of the things that's very interesting when you get into the Russia question is do we have leverage there? Yes, we do but so does he. So Europe is highly dependent on Russia for natural gas. I think 30% of their gas comes from Russia and if that doesn't sound like a lot, just keep in mind there's no place else to go. Now right now, today that may not be so much of a problem but if you have a cold winter, that's going to be a big problem and it hits European countries differently. Some have more storage and are able to weather that better than others. So he has leverage too. I think also one of the things about energy as a tool of statecraft is you can't decide that you're going to use that tool in the middle of the crisis. You have to have been laying in the means before you get to the crisis point or your ability to actually do anything is limited. Now I think we may well get a chance to see if it works with Russia. As I said, it cuts both ways. He has a lot of leverage too. On the other hand, as I said, oil and gas tend to have a corrupting influence and when you're a Petro state the way Russia is, you're often skimming a lot of money off the top of those sales and you've got lots of obligations that are very real time, very immediate. So if you lose the ability to give out that money in the near term, it can have an immediate effect on your decision calculus. As I said, on the other hand it cuts both ways and I think it's harder for us to affect change when it comes to gas because Europe is so dependent and at the same time, oil is a very globally integrated market. It's also hard to do that to change his calculus there. On the other hand, he has a lot of obligations to meet. So I think it'll be an interesting role of the dice and I think you will see some sanctions coming out in the near future and we'll get a chance to see if it works and it won't be the last time that that question will come up. Great, great, in the same light, but just on a broader canvas. So it is said for the reasons you stated, the United States is importing much less as a portion of the total energy picture than it used to. So those volumes of oil instead of coming here are being shoved out. Have US strategic interests changed? What do US strategic interests look like over the next 10, 15 years because of this? I don't think that the changing energy realities change our strategic interests and including not even in energy markets. We had an interest in a stable functional market. We still do, but one of the things that I think is a really interesting question is how does it change everyone else? So we used to be the world's biggest customer and as much as that makes you vulnerable it also makes you powerful and the world's biggest producers care a lot about what we wanted and what we were doing. China is now the world's biggest customer. They're very close to Saudi Arabia. They've built a major refinery on Saudi's south coast. What does that mean for their common strategic interests and how does it relate to us? And that is a very open question. I don't know the answer to that. You could say that that's gonna be a constructive force that China and the United States now have a common interest in having the Strait of Hormuz open. 20% of the world's oil flows through there. If something were to happen there it'll kill both of our economies. So again, ours not as directly as there is anymore but we have a common interest in the free flow of oil through that market. Will that be something that we can work on together? I could tell you that I have former colleagues in the Department of Defense who would not wanna do anything that might encourage China to have to develop a bigger Navy. But it's a common shared interest now in a smoothly functioning global market. On the other hand, a lot of the producers, you look at a place like Nigeria, for example, where we used to buy oil from them, increasingly we are not because the grade of oil that they produce is what we're producing now at home. They're gonna be looking east. So does that change their relationship with us? I don't know. It's hard to believe that it wouldn't because politics and money do go together and your economic interests and your political interests are rarely separable. So what that's gonna mean for our relationships and our strategic interests I think is very much an open question. The Saudis are worried. Saudis are worried about shale oil, about shale gas, and about US commitment, continued commitment because of that to them and to the Gulf. Should they be worried? I don't think so, both for a number of reasons. One is that, again, we're all gonna have common interests in play. They are gonna continue to have customers. We're gonna continue to be a global customer for all kinds of reasons. Even with tide oil, if you look at the projections, they crest and start to decline as soon as 2020. And there's still some open questions about decline rates in general. So at what point do we become status quo ante and if we've burned all of our relationships and now we're back competing for global resources, that's not gonna be in our long-term interests either. I think the Saudis are gonna have customers. We're gonna continue to have a common interest in a global market. I don't think they need to be worried, but of course, they make it clear they'd like to have a steady partner in the United States. But then again, so would we in them. So another common interest. Okay, the United States against the narrative that we hear very frequently is not going to be, you said, is not going to be energy or oil independent. So what is the United States gonna be? In 10 years, 2024, is the United States stronger strategically because of this change in its energy resources? Is it the same? You know, I think things will be different, of course, but not solely because of energy. And I think even when people do talk about self-sufficiency and energy, they usually are talking about North America, not just the United States, because we will continue to trade quite a bit with Canada and Mexico no matter what. But again, I think it's more the second and third order effects that are gonna be particularly interesting. So not that having more resources at home directly changes our strategic interests, but rather this reordering globally of those producer-consumer relationships will have second order and third order effects on us. And I'm not sure what those look like yet, except that I do think we should be looking at them closely, and I hope you will. So let's move on, and I will open to questions just after a couple more from me. And first on renewables. So before Obama came to power, under Bush, we were given a narrative that we're entering a new age in which fossil fuels were over time going to recede and renewables were going to grow, and that the government, especially under President Obama, was going to play a large role in encouraging that. The stimulus contained $2.4 billion for battery, for example, biofuels and so on. The big creation of these industries has not taken place in that narrative. And I wonder in our reality that we grow up with the Apollo narrative, the Manhattan Project narrative, DARPA creating the internet and so on, if we just have a false impression of what the government can do, what the Pentagon can do when it gets into the game of backing, in this case, renewable energy. Yeah, I think that there's a lot of excitement when you get specific about it being the Department of Defense about what the Department of Defense can deliver in this area. And there should be because there's a long history of tremendous innovations that come out of the defense sector. But you have to understand the context, which is innovation in the defense sector works best when you're solving a military problem. So if you're solving an entire commodities market problem, that's not really what DOD does the best. But if you have a war fighting challenge and you need to figure out how to address it, then our value proposition is completely different. So to be specific about what we were looking at in the energy field, we have a lot of scale. DOD, they have a lot of scale. DOD uses a lot of fuel last year, somewhere between four and five billion gallons of fuel. So how they buy that fuel can change things, can be a catalyst. However, I mean, you're talking about 104 million barrels a year of demand in a market that's 89 million. 89 million barrels, billion barrels, it's a total demand for the market. A day it's 89 million barrels. And DOD uses 300,000 barrels a day. So it's a drop in the barrel. It's a huge global market. So DOD can't change a global market. What DOD can change, however, is we have these very remote combat outposts in Afghanistan where delivering fuel there is dangerous, it's difficult, it's not reliable. People die moving fuel to those locations and people can't do their jobs if they don't get it. So we started putting solar panels on the ground there. And that can't solve the world's problems. But what it can do is they there will pay more for high efficiency solar than the commercial market will because it's all about the dollar per watt in a commercial market. But for those folks on the ground in that position who are getting shot at, it's about getting off the supply line. So all of a sudden that's how DOD becomes a force for change in a market like this. So as long as you understand what the scope is, DOD and government can be a stimulus or a pull for innovation. But you can't expect something that's 2% of the U.S. market to change everything if the other 98% isn't doing anything. Right, all right. Okay, last Friday, you've only left work last Friday, so. At 8.30 at night. Not, yeah, not so much time to reflect. But maybe you have some reflexes. Lessons learned, four years, first person in this position, building energy security. Lessons learned. Yeah, and I think, you know, you and I were talking about that and I think I have a long way to go to digest all the lessons and we'll look forward to help doing that. But, you know, one thing I think you learn is you kind of have to keep your expectations modest for change, particularly when you're in a war. And there's a saying that this one, Army Colonel said to me early on, he said, you know, you want it bad, you get it bad. So if you go out and you say, I'm gonna give you this piece of technology that's gonna make everything different and better, I'm gonna trick the system to get it to you, it's probably not gonna work out very well. And it's funny, when people talk about the Pentagon, they talk about it as though it has artificial intelligence. They'll say, the building wants this and the building wants that. And I think it does. And it gets back at you. If you try to do things too fast or cut the corners, you have to go through the process. And what's great about that is, after four years of trying to be patient and not coming up with phony goals and not trying to force the system, you're more likely to make lasting change if you do it that way. It's hard when you're a political appointee because your timelines are short and their timelines are long, but it's a lot more satisfying to make a change that lasts. So it's probably my biggest lesson, mind. Cool, cool. Okay, let's open this up right here. Hi, my name is Suzanne Berger. I'd like to know what you think about the question of exporting some of our shale oil and gas. At a time when the United States has been so critical of China for its restrictions on exporting rare earth and other vital things, how are we going to defend our refusal to export that? I think it's a good question. And I would be really interested to hear what you have to say about that too, Steve. I think the prohibition to export crude oil. Now we do export refined oil and we're exporting a lot of refined oil right now. So there's no prohibition there and we're exporting at hand over fist. The prohibition on exporting crude oil I think is an artifact of a different time. And it really dates back to the Saudi oil embargo. I don't think it's particularly effectual now. So it wouldn't surprise me. I think you can hear the Secretary of Energy and others telegraphing. It's up to Congress ultimately. So even though I think it's a rational proposition to talk about that, I haven't seen a lot of rational behavior out of Congress lately, although I of course thought that Senator McCain gave a very nice speech. So, and as for natural gas, now we've seen seven export permits approved. And I think it's pretty clear that that's gonna continue. So we are looking to export. Let's take one more here. Hi, Simone Garro from Control Risks. I wanted to ask you what you thought about the recent changes in Mexico energy reform and how you think that's gonna affect the landscape? In Mexican energy reform? I think that it's a very positive sign. It's kind of, it's always hard on these things because as I said, there's this short term, long term dilemma here in that for Mexico's economy to thrive and for them to halt a slide that their production, oil production has been declining very fast and they don't have good natural gas production. You know, there's on the one hand, when you say, oh, we should be producing more oil and gas and making climate change worse, but at the same time, you have to get through now to get to the transition. And if in Mexico's economy really starts to falter, that's not good for anybody. So I think the fact that they're announcing reforms that could change that downward slide is extremely encouraging. They're highly dependent on the revenue stream from oil and gas and they need the international engagement. And I think one of the things that I think is particularly encouraging about the announcement of those reforms is that this is a mature country saying we can do this on our own terms. It's understandable what the constitutional prohibition, why it started, why it's a strong political and emotional issue in Mexico, but it's also understandable that at this point in the life of this country that they can do this on their own terms. So having said that, we'll have to see how it plays out. I wanna take one more. Is there anyone on this side? Okay, I had one, let me take you. Cheryl. Joel Garrow from New America and Arizona State University. You mentioned the corrupting influence of oil, the so-called curse of oil. If our reserves are booming, is that going to corrupt the United States? And if so, how? Everything's relative. We have private ownership of mineral rights, which is pretty much not true anywhere else in the world or very few places. So the way that oil generally corrupts what the resource curse generally refers to is that in most countries, the proceeds from mineral wealth go straight to the state. And then the state decides how to redistribute. And it's part of the problem in Russia, but also in Ukraine in that even though they weren't necessarily producing the resources that were going through the country, the proceeds from the passage of those resources was going straight to the government. And so any place you see the state owning the mineral rights and pocketing the proceeds, not all of it goes back into economic development. And in some places, a lot of it doesn't go back into economic development. That's not true here. So private ownership, it's one of the reasons that I think you're seeing, and I think you've written a lot about this, that you're seeing shale and tide oil booming here and not everywhere else. Because it's a combination of the way our country is structured and the way our mineral rights are structured that's conducive to that. And almost nobody else has those circumstances. Okay, that's what we have time for. Thank you very much. Thank you everybody. Thank you.