EconomyFinancialNorth America and the energy ace up its sleeve

North America and the energy ace up its sleeve

(Expansion) – I continue with my argument about demographics and energy as regional competitive advantages. Let us now review the energy issue. In this area we must make a distinction between where we are, where we are going, but above all, the transit between those two points.

In the regional aggregate, our circumstances radically change for the better. According to data from the International Energy Agency (IEA), the energy balance begins the 1990s with a shortfall of 8,903 terajoules (TJ), which increases to a deficit of 22,066 TJ in 2005. From that year the trend changes and for 2019 North America shows a surplus of 8,999 TJ.

In contrast, the other two large regional blocs consume more energy than they produce: Europe imports 27,325 TJ in 1990 and the figure increases to 37,592 TJ in 2019. In China the numbers are more impressive: it goes from a small surplus balance in 1990 to 967 TJ to a deficit of 32,839 TJ in 2019. These two regions of the planet have an Achilles heel; to move their powerful machinery, they need the energy of others.

The change in the position of our region is largely due to the shale revolution in the United States. Although its impact on the oil production of our neighbor to the north should not be overlooked – it went from 11 million barrels per day (mbd) in 2008 to 20 mbd, 10 years later – it is the natural gas category that I am interested in highlighting. Its contribution to the total regional supply of 38.8 million TJ is no longer so far from that corresponding to oil (41.0 million TJ). This implies abundance in the key hydrocarbon for the energy transition.

It should be elaborated. The use of renewable energy sources (wind, solar) is imperative to address climate change, but also to reduce energy dependence, since they are less marketable than hydrocarbons. That is, in a world where this type of sources prevail, the aforementioned energy imbalances should be smaller. To date, the problem is one of intermittence: by not guaranteeing a regular supply of energy, they require the complementarity of sources such as natural gas.

In North America, we thus have a firm footing in the energy matrix of the 20th century, but we also have the necessary resources to make a smooth transition to the energy matrix of the 21st century. The contrast with China is particularly stark: its power generation is very “dirty” – 3.2 times more coal than oil, for example – and a more determined move towards sustainability would dangerously increase its energy dependence. If today Russia keeps Europe awake at night, tomorrow it will perhaps be China that keeps Russia awake at night.

And Mexico? We have played a marginal role in changing regional circumstances and by choice. Our geological conditions are similar to those of our neighbors and partners. We could have contributed more to the energy matrix that is about to change – our energy production drops 23.2% between 1990 and 2020 – but we did not.

More worrying is that we are wasting a new opportunity. The abundance of natural gas in the region would allow us to advance rapidly in the energy transition, since we could privilege investment in sustainable energy sources and in distribution and transmission tasks. That is, exactly the areas that the current administration is attacking. It thus seems that we are trying to recreate an energy matrix more in accordance with the 20th century, under an argument of energy sovereignty that, in view of the results to date, is far from being achieved.

The consultations on energy policy within the framework of the T-MEC are, from this perspective, the foreseeable result of an effort to go against the grain of a very favorable regional dynamic. For the regions we want to compete with, watching this version of the paradox of an irresistible force meeting an immovable object should be reassuring and even fun. They must think that there is so much energy in North America that even Mexicans can waste it on unnecessary conflicts.

Editor’s Note: Sergio Luna studied Economics at UNAM and the University of London. He was an economist at the National Bank of Mexico for 33 years and continues in that profession, now independently. Follow him on and/or on . The opinions published in this column belong exclusively to the author.

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