Anyone who doubts that the deployment of the technologies we have come to call fracking constitutes a revolution should consider this. U.S. oil production has soared by 70 percent in the past six years. American refineries have cut in half their imports from the OPEC cartel, setting off a scramble by those countries to find new markets. Nigeria, once among our top-five suppliers, no longer exports to us a single barrel of its light, low-sulfur oil -- the type produced by fracking. Thanks to a bit of definitional legerdemain that gets partially around an old anti-export law passed when we were deemed excessively dependent on foreign oil, we are set to become a major exporter. Our crude exports are at their highest level since the 1950s, and when, as seems likely, the remaining ban on exports is removed, will rise sharply. Shipments of just the type of crude European refineries need will head there, more Alaskan oil will be shipped to Asia, and global competition will become more intense. RIP theories of “Peak Oil.”
The ripple effects of the glut-induced drop in oil prices to levels not seen since December 2012 are only now beginning to be felt.
· Consumers are no longer grumpy when filling their tanks. Average gasoline prices have fallen from this year’s peak of $3.71 in April to $3.26 now, leaving $170 million in consumers’ pockets every day, money that would have otherwise gone down the tank. That’s the equivalent of a multi-billion dollar annual tax cut that will almost surely buoy retail sales during the Christmas shopping season, one retailers are approaching with more than their usual trepidation. And when proposed natural gas pipelines from producing fields in the Northeast to consuming centers in the South are completed, consumers there will become still richer as heating bills take a tumble.
· Car manufacturers are overjoyed. Lower gasoline prices make it more attractive for consumers to buy the big much-loved SUVs that are not exactly gasoline-sipping machines -- and are the most profitable vehicles produced by U.S. car manufacturers.
· Railroads are finding themselves hauling lots of oil despite the fact that it costs about $10 more per barrel than by pipeline. But shipping by rail from the Bakken shale fields to the Gulf Coast takes only five-to-seven days, compared to forty days by pipeline, and avoids the massive new investment that extending the existing pipeline infrastructure would require.
· Petrochemical and other manufacturers that use large quantities of fracked shale gas find their costs of energy so low relative to those in Europe and elsewhere, perhaps half those in green Germany, that their competitive positions are better than they have ever been.
· The overall economy and our trade balance are being positively affected by our new position as the world’s largest oil producer. Daniel Yergin, the nation’s preeminent energy historian and analyst, notes that “money that was flowing out of the United States and into sovereign wealth funds and treasuries … will now stay in the US, … creating jobs.”
Enough about the grubby stuff of getting and spending. On to what matters most in our turbulent world: power. Joseph Nye Jr., the Harvard professor and father of the concept of “soft power” (preferred by liberals to the hard stuff) in international affairs, tells the New York Times that a “shale gale” is enhancing America’s clout. “If you are attracted to a country or any leader, a lot has to do with the feeling, ‘Do they have momentum? Is the wind in their sails or are their sales flapping? We’ve got a gust.’”
That gust is blowing away some of the revenues Vladimir Putin is counting on to fund his assault on the post-World War II territorial settlement in Europe. Columbia University’s Center for Global Energy Policy estimates that Russia’s Gazprom could lose 18 percent of its revenues as a result of direct competition from exports of U.S. liquefied shale gas, and increased competition from other liquefied natural gas (LNG) previously imported into the U.S. from Qatar and elsewhere, now seeking new markets. That competition will accelerate when new liquefied natural gas terminals are completed and others converted from import to export facilities (projected cost of one such conversion, Texas’ Golden Pass export terminal, joint venture of Exon Mobil and Qatar Petroleum: $10 billion), and will become even more intense when new export terminals in Australia come on line.