Oil Alliance Discussions Underscore American Energy Progress
As oil prices remain below $25 per barrel, U.S. government officials are in discussions about establishing a new oil alliance with Saudi Arabia to stabilize international markets. This potential new accord is one of several ideas the administration is considering to counteract prices that were driven to multi-decade lows in the wake of COVID-19 and an international price war between Saudi Arabia and Russia.
Saudi Arabia this month announced its intention to ramp up production by 3 million barrels per day in an effort to gain market share after Russia refused to cooperate on deeper production cuts. An agreement with Saudi Arabia to implement production cuts could bring much needed stability to the market. According to Energy Secretary Dan Brouillette,
“As part of the public policy process, if you will, our interagency partners often get together and talk about a number of different items, but we’ve made no decision on this.”
Regardless of whether a deal between the United States and Saudi Arabia comes to fruition, the very idea that America holds a position to influence global oil markets stands as a testament to the immense progress the U.S. energy industry has made over the past decade. Since the shale revolution began, domestic producers have boosted U.S. oil output to nearly 13 million barrels per day, making it the world’s largest producer, and securing the country as a key player in global oil markets.
As many can recall, this wasn’t always the United States’ role on the global stage…
The Impossible Dream
Before the shale revolution, the idea of an energy independent America seemed farfetched:
“All seven presidents of the past 30 years, Democrat and Republican alike, have tried to wean the U.S. off imported oil. All have failed… The Organization of Petroleum Exporting Countries, especially Saudi Arabia and its neighbors, is skillful in its management of oil prices to maintain America’s dependence.” – Wall Street Journal (2003)
Even a few years into America’s hydraulic fracturing age, the United States’ ability to fulfill its own oil needs, let alone influence global markets, seemed inconceivable:
“Even if, one day, the United States produces enough oil to satisfy its own needs, it still won’t be entirely ‘independent’ from the rest of the world”- Vox (2014)
In December 2015, Congress decided to lift its four-decade oil restriction on U.S. crude oil exports. While this move was historic, many experts doubted it would have any geopolitical consequences:
“…Take a look at Energy Information Administration modeling of what would happen to markets if the ban were lifted. In its reference case, which is its best guess of reality, lifting the ban has no impact on U.S. production or prices because U.S. refineries can absorb all the oil that the United States produces.” – Council on Foreign Relations
“U.S. crude exports are unlikely to impact the big picture in global oil markets given that the U.S. is still a major importer of crude to the tune of seven million barrels a day or close to 7 percent of current global production. Any U.S. exports will have to be matched by increased imports, leaving the global crude supply-demand balance unchanged.” – Badr H. Jafar, president of Crescent Petroleum
“Removing restrictions on U.S. crude oil exports either leaves global prices unchanged or lowers them modestly.” – U.S. Energy Information Administration
A New Energy Era
Less than five years later, the United States has transformed into an energy superpower. The Permian Basin is the highest producing oil field in the world, surpassing Saudi Arabia’s Ghawar oilfield in April 2019. Last October, the United States began exporting more petroleum products to overseas markets than it imported. It has eclipsed both Russia and Saudi Arabia as the world’s top oil producer, and is expected to dominate world energy markets through 2030, accounting for a staggering 85 percent of the world’s oil production growth and 30 percent of natural gas growth, according to the International Energy Agency.
Needless to say, U.S. shale broke OPEC’s vice-grip on the global energy industry.
America’s Energy Industry Provides Beacon of Hope
The fact that the United States is even in discussions with Saudi Arabia over possibly forming the “world’s newest oil cartel” underscore the progress that the industry has made to become a global energy leader, despite those who claimed it impossible. Even when faced with seemingly insurmountable obstacles, America’s oil and gas industry perseveres, often beating all expectations. In these anxious times, we can be comforted knowing the oil and natural gas industry will continue to ensure that we have fuel to heat our homes, power our hospitals, and that we will come out strong as a country when this global crisis is over.