The emergence of shale energy in the US has heavily influenced the balance of global economic and political power over the last six years. Despite geopolitical conflict across the Middle East, the price of oil is falling thanks to the United States' shale fracking boom.
You have likely seen the US economic data regarding the impact of shale energy. Daniel Yergin provided an overview of the economics earlier this year in The Global Impact of US Shale.
“Since , the industry has developed fast, with shale gas currently accounting for 44% of total US natural-gas production. Given abundant supply, US gas prices have fallen to a third of those in Europe, while Asia pays five times as much. Tight oil, produced with the same technology as shale gas, is boosting US oil production as well, with output up 56% since 2008 – an increase that, in absolute terms, is larger than the total output of each of eight of the 12 OPEC countries. Indeed, the International Energy Agency predicts that in the next few years the US will overtake Saudi Arabia and Russia to become the world’s largest oil producer.”
This week, Bloomberg noted that the “US is pumping the most oil in 27 years, adding more than 3 million barrels of daily supply since 2008.” This production growth has allowed a “26 percent drop (in imports) from the same month in 2008.”
Ohio’s role in shale continues to grow. Billions of dollars of capital spending are occurring on a yearly basis and the US Energy Information Agency recently included the Utica (a shale play that exists predominantly is eastern Ohio) in its monthly drilling production report. At the same time, Ohio drilled its 1,000th horizontal well in the Utica.
The Bloomberg article supports the point that despite fighting across Iraq, Libya, Ukraine, and Gaza (I would add Syria), a US fracking induced supply glut is shielding the oil markets. Today, oil prices are 30% lower than their peak almost 10 years ago. A peak that was brought about by another Middle East conflict. A major benefit of the market shield is the ability to weigh US intervention into these latest conflicts on a non-economic basis. Many have argued, particularly since the oil embargo of the 1970s, that our Middle East policy has been driven by access to oil. Those allegations have not gone away, but they have lessoned and will hopefully allow a more thoughtful discussion about US involvement in the Middle East.
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