"How shale oil reshapes American security" Topic

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Despite many uncertainties about its scope and duration, the shale revolution will continue to insulate the United States from market shocks affecting the global price of both crude oil and liquefied (shipped) natural gas. Oil exporters such as Saudi Arabia have previously wielded a hugely powerful "energy weapon," exerted with devastating effect after the Arab-Israeli war of 1973. And gas producers, most notably Russia, have sometimes exercised a comparable grip over the recipients of their piped supplies. But as the United States becomes increasingly self-sufficient in energy, it is acquiring, in equal proportion, more immunity from such actions, putting it in a position to exploit this to its own advantage. For example, until the advent of commercial shale in the United States around 2008-9, the adverse effects on the price of crude dictated heavily against tough measures on Iran. But since 2012 the United States has successfully supported EU sanctions on the flow of Iranian oil: these measures have drastically reduced Iran's exports, slashing its revenues and punishing its economy without pushing global oil prices over $100 USD a barrel.

America's breakout position in the shale revolution raises a number of strategic possibilities. For example, the United States could manipulate the price of energy for its political rather than narrowly commercial benefit. Future U.S. shale output could depress the market price of crude oil and liquefied natural gas and undermine the viability of other countries' shale- (and conventional-) energy industries, which require well-defined break-even costs and clear margins. By doing so, the United States could maintain its clear strategic advantage as a virtually self-sufficient producer. Comparisons can be drawn to the Cold War in the 1980s, when Saudi overproduction depressed the price of crude oil and thereby depleted the Soviet Union's revenues; or to Moscow's decision, in 2010, to abandon the massive Shtokman gas field, the viability of which was undermined by sharply lower market prices. Of course, such an approach could damage America's own shale industry, whose profits and margins would also come under pressure.

And much much more.

In the more foreseeable future, the importance of protecting existing sea lanes will fall as domestic production of oil and gas increases. Hitherto, the United States has purchased large quantities of oil from abroad, particularly the Middle East, and until 2009 also bought large amounts of liquefied natural gas, mainly from Qatar and Russia. As a result, the U.S. military has prioritized the protection of the sea lanes used by supertankers and LNG carriers moving from these suppliers: the protection of the Persian Gulf consumes at least 15 percent of the U.S. defense budget. It also maintains the capability to patrol chokepoints that are vital to the wider global market: any interruption to the oil that flows through the Strait of Malacca, for example, would spike the global price of oil even though it directly supplies only Asian consumers, notably China and Japan.

As the United States becomes more energy self-sufficient, its defense priorities will change. Of course, it still would want to preserve the steady flow of crude oil to the wider global market, as any sudden price hike can unsettle allies and feed into the American economy. Thus, it will continue to need a large and powerful navy for that function and to protect its own natural gas exports. But there likely will be reassessments of which sea-lanes matter most.

And more, mostly on fracking that makes control of water supplies even more vital.

In the town of Springhill you don't sleep easy
Often the earth will tremble and roll
When the earth is restless, miners die
Bone and blood is the price of coal.

Interesting frakking article – thanks for sharing!

" the United States could manipulate the price of energy for its political rather than narrowly commercial benefit."

Oil and gas are sold on an international market by multi-national companies. Unless you want to institute some sort of nationalization of the resources, as in a socialist country, then you have to live with the fact that most of these resources will be sold abroad. And with the rapidly growing economies of the developing world, there will never be enough supply to meet demand.

This new resource has appeared during a time of global economic slow-down, thus giving the false impression that we're on the cusp of some sort of long-term national energy self-sufficiency. As soon as global demand picks back up, we'll see this advantage evaporate.

Even now, with the alleged boom in domestic energy production, gas and heating costs have not fallen:

eia.gov/naturalgas/weekly

Diesel, which is the most important driver of retail prices because so many goods are transported by trucks, has actually become more expensive since early 2009 because of steady economic growth (and thus increased demand) coming out of the recession:

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"Comparisons can be drawn to the Cold War in the 1980s, when Saudi overproduction depressed the price of crude oil and thereby depleted the Soviet Union's revenues"

No, the Saudis were a nationalized producer during the Cold War. The United States government does not have any such leverage over the oil companies that extract these resources. Indeed, the oil companies have lobbied very successfully to prevent even the most rudimentary government oversight, and a number of Congressmen defended them against gov't action, even in cases where Americans were killed and massive property damage ensued at taxpayer expense, such as the B.P. Gulf spill.

The US does not enjoy any political control over these resources. Quite the opposite; the companies that extract them enjoy considerable control over US politics.

Your premise also assumes the government will let us mine it, and transport it, which seems to be in question currently.

The real reason oil imports and usage are down in the USA is that many Americans can no longer afford it, since it's doubled in price. It's not at the targeted $8.00 USD – $10 USD a gallon, desired, but I suspect people are busily working on that too.

Does anyone actually think that even if we found/developed unlimited fuel sources that big business and the politicians would actually allow cheap fuel prices ?

Just so everyone understands, oil will never be as cheap as it was in the 50s or 60s. There is not anymore oil out there now then 100 years ago. We just have ways to get at what was too expensive to be worth getting before. So now thanks to technology we can get the expensive stuff out of the ground at a price that companies can make a profit on.

We shouldn't underestimate the power of the US to rig markets, backed up by the most powerful military in the world. The US has a lot of leverage with Saudi Arabia, for example, and can make those Sheikhs rattle and roll ;-)

This is OT, and discusses price fixing: "The Illuminati were amateurs". Some of you may find it interesting. I hope it doesn't derail the topic, and I appologise if this is out of bounds. No sacred cows are injured in this article.

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Not to mention, Doug, the state tax added to gas, booze and tobacco. I don't smoke or drink so I avoid those costs … but I have to drive … And it is in the works that the states will all tax internet sales. And may states have looteries, which we were told in Ohio, that much of that money will go to the schools. However, we still get asked to vote for more school levies … which I just voted against … When is enough … enough … I'd be happy if gas cost what it did before the last two elections … somewhere around $2.00 USD …

"I'd be happy if gas cost what it did before the last two elections … somewhere around $2.00 USD"

Gas averaged $4.16 USD per gallon nationwide in June 2008, which is the highest it's ever been:

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Then demand collapsed.

I'd rather have four dollar gas than a Great Recession.

Actually the US government can do quite a bit about energy prices. Much of the restriction on supply is due to regulation. Whether in where and how drilling/extraction is done or with environmental laws that restrict 'pollutants.'

A realistic assessment of those regulations could lead to quite a reduction in cost/increase in supply.

Which would in no way influence what you and I pay at the pump.

Even with the increased domestic production, gas still fluctuates around $2.60 USD a gallon. If supply has increased (and it has), why is price so high? Where is all this excess processed petroleum going?

The answer is…overseas, where increased demand keeps the price where it is.

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Exactly.

Sorry Lukhum, I don't remember paying that … and I used my car for work daily back then … As far as being in the Great Recession … it depends where you are in the US and who you talk to …

"Sorry Lukhum, I don't remember paying that "

Wow, I certainly do. It went on for years, and it was painful. Regular gas first averaged well over $3 USD per gallon in 2005:

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It remained at that level for the next three years, then went up again and reached four bucks in 2008.

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It was very well covered at the time:

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I beg to differ on what is causing the rise of Diesel. The regulations calling for low sulphur are one of the biggest reasons. Coupled with the inability for some refineries to remove said sulphur. Nigerian oil deposits are valued due to their low sulphur content. Refining and regulation are the two biggest drivers of high prices. While a better economy increases demand, increased demand from China and India have caused problems too.

Another problem, if you are in the U.S., is the steady decline in the value of the U.S. dollar which in turn drives up oil prices since they are valued in dollars.

Lastly, there isn't a shortage of oil. Carter said we would be out of oil in the late 1990s. Proven oil reserves are actually higher in every Middle Eastern country than they were in the 1970s. While complicated, fuel prices are manipulated by limiting production foremostly (primarily through market manipulation of OPEC), refining limitations (when was the last refinery built in your neck of the U.S.; especially true of California), formulation regulations (it would be cheaper to have one formulation across the country rather than the over 30 we currently have) and then scarcity due to the previous reasons mentioned.

While we like to say that the market equalizes pricing, we don't have a true free market when it comes to fuel. Many OPEC countries have special deals for their domestic markets and favored trading partners. In other words, not everyone pays the going rate.

You maybe correct Lukhum … but again, I don't remember it that way. At least where I live in Youngstown, OH … Places like NY and CA always pay higher prices … for everything …