Cheap gas feels good. It made for a more pleasant Christmas. But it should be remembered that many of the very best, highest paying jobs created since the onset of the great economic slowdown (in 2013 oilfield workers in North Dakota made on average over $112,000/year – many without a college degree) in the USA have been in the energy sector, and primarily in hydraulic fracking. Say what you want about the practice but it has been a (the?) key source of economic growth (such as it has been) for the United States over the last 4 years. Additionally, and this is not well known, fracking has (and the cheap natural gas which has come with the practice) pushed down USA carbon emissions markedly. As of October 2013 carbon emissions were at 1992 levels and dropping. Think about that. If one is concerned about global warming, and we know some of our readers are, that should be cause for celebration.
And before people start freaking I out, I have absolutely no horse in the fracking race. In fact there is a pipeline scheduled to go in just south of me transporting fracking product from West Virginia to the coast which I am not terribly keen on.
Saying this however the fracking revolution has been a huge benefit to the US economically and at least as important from a geopolitical perspective. We are now a net exporter of oil. We are the biggest producer in the world! 5 years ago people would have laughed at the idea that our reliance on foreign oil could be reduced so quickly, if at all.
The Saudis see this development as an existential threat. And they should because it is. Their position in the world rests in completely dominating the crude oil game. If they lose that, eventually the princes lose control of their country.
External oil is not the only existential threat facing the Saudis right now either. Iraq has been turned into an ally of Iran (the chief Saudi rival) thanks to our invasion. The Shiites in the Levant and elsewhere have been in ascendancy all across the region much to (Saudi) Suni dismay. There is the fear in Riyadh that the US may also be quietly working with the Iranians. Iranian jets have been attacking ISIS positions over the last 2 months. This has to be happening with our approval.
So the princes are playing their best cards right now, but pushing Texas and much of the middle of the USA into recession could cause resentment.
Add that supercheap oil destroys much of the “alternative energy” effort, and one can see an issue of concern for both the Golden and the Lone Star states.
Me? I’ve got to tell you. I love cheap gasoline. And I don’t even commute.
If there ever was doubt about the strategy of the Organization of Petroleum Exporting Countries, its wealthiest members are putting that issue to rest.
Representatives of Saudi Arabia, the United Arab Emirates and Kuwait stressed a dozen times in the past six weeks that the group won’t curb output to halt the biggest drop in crude since 2008. Qatar’s estimate for the global oversupply is among the biggest of any producing country. These countries actually want — and are achieving — further price declines as part of an attempt to hasten cutbacks by U.S. shale drillers, according to Barclays Plc and Commerzbank AG.