How the US oil, gas boom could shake up global order
As energy production in North America climbs, NBC News' Chief Foreign Correspondent Richard Engel explores what it will mean to oil-producing countries in the Middle East.
Without fanfare, China passed the United States in December to become the world's leading importer of oil ? the first time in nearly 40 years that the U.S. didn?t own that dubious distinction. That same month, North Dakota, Ohio and Pennsylvania together produced 1.5 million barrels of oil a day -- more than Iran exported.
America?s drive for energy independence
As those data points demonstrate, a dramatic shift is occurring in how energy is being produced and consumed around the world ? one that could lead to far-reaching changes in the geopolitical order.
U.S. policy makers, intelligence analysts and other experts are beginning to grapple with the ramifications of such a change, which could bring with it both great benefits for the U.S. and potentially dangerous consequences, including the risk of upheaval in countries and regions heavily dependent on oil exports. :SIB :SIB
But many experts say the U.S. would be the big winner, in position to reshape its foreign policy and boost its global influence.
"People already are looking at the U.S. differently, seeing the U.S. as much more competitive in the world,? said energy analyst and author Dan Yergin, saying that he first noticed the change in the world view of the U.S. at the World Economic Forum in January in Davos, Switzerland.
Watch a drilling crew at work near the small town of Garden City, Texas, as they drill an oil well that eventually will extend more than a mile deep and a mile sideways in the Permian Basin.
As detailed in the first two installments of Power Shift, an NBC News/CNBC special report, the United States is reaping the benefits of an energy boom created by new drilling technologies that have unlocked vast domestic oil and natural gas reserves. Coupled with decreasing demand due to energy efficiency and continued cultivation of alternative energy sources, an increasing number of experts believe the U.S. could achieve energy independence by the end of the decade ? realizing a dream born during the gas crisis of 1973.
But who would be the global winners and losers in such a scenario?
Most U.S. policy makers and experts agree that the U.S. and its allies ? particularly its North American neighbors -- would be the biggest beneficiaries.
Boom helps Iran sanctions stick
In fact, they say, the West already has realized one major benefit: the success of international sanctions against Iran over its nuclear program.
Carlos Pascual, the State Department?s coordinator for international energy affairs, noted last month at the CERAWEEK energy conference in Houston that increased U.S. oil production, coupled with a boost in exports from Iraq and Libya, has kept oil prices stable despite the loss, because of sanctions, of up to 1.5 million barrels a day in Iranian exports.
?What this has taught us, and helped underscore, is that within the world we live in today, hard security issues and energy policy issues have become fundamentally intertwined,? he said.
Yergin, who also is a CNBC energy consultant and author of the energy-focused nonfiction best-sellers "The Quest" and "The Prize," put it this way: "People talk of the future impact. The increase in U.S oil production has already had an impact: Sanctions wouldn't have been effective without U.S. oil production. ? We've added (within the last year) almost as much as Iran was exporting before sanctions.?
Hossein Moussavian, a former Iranian ambassador to Germany and nuclear negotiator who's now a fellow at the Woodrow Wilson School at Princeton University, said "the radicals" in Tehran failed to foresee the changing energy picture, believing that sanctions wouldn't be imposed and that, if they were, they wouldn't work because oil prices would surge.
"The Iranian mistake was to believe ? the threats of referring Iran to the United Nations Security Council, imposing sanctions, was just a bluff," he said.
In the longer term, observers say that the Organization of Petroleum Exporting Countries (OPEC) and many of its member nations are likely to be the biggest losers if the U.S. continues to cut oil imports, likely decreasing oil prices in the process.
"A dramatic expansion of U.S. production could ? push global spare capacity to exceed 8 million barrels per day, at which point OPEC could lose price control and crude oil prices would drop, possibly sharply," the U.S. intelligence community's internal think tank, the National Intelligence Council, said in its ?Global Trends 2030? report in December. "Such a drop would take a heavy toll on many energy producers who are increasingly dependent on relatively high energy prices to balance their budgets."
With some analysts predicting that oil prices could drop as low as $70 to $90 a barrel ? down from the current price of nearly $110 per barrel of Brent crude oil ? a ?scramble? among OPEC members for market share could ensue, said Edward Morse, an energy analyst with Citigroup and co-author of a recent report on titled ?Energy 2020: Independence Day.?
An International Monetary Fund analysis indicates that many major oil-producing states need more than that lowest price level to meet their budgets and would be forced to increase output or reduce spending, which could trigger unrest. Among them, according to the report: Iran, Libya and Russia, at $117 a barrel; Iraq, $112; Yemen, $237; and the UAE, $84.
Iraq, which has had production from its rich oil fields curtailed by war or sanctions for half of the 53 years of OPEC?s existence, poses another challenge to the organization.
Now that it?s finally free of such interference, its production is increasing by between 500,000 and 900,000 barrels a year, making it the second fastest growing oil-producing country in the world after the U.S.
?And, by God, no one?s going to impose any quota limitations on them,? said Morse, referring to Iraq?s OPEC partners. ?So part of the challenge to OPEC is internal as well as external.?
Can Saudis maintain market-maker role?
Analysts say OPEC heavyweight Saudi Arabia, which controls vast reserves of oil and needs $71 a barrel to meet its budget, according to the IMF, will do everything it can to remain the market-maker. But in that role, it will face new challenges, they say.
?Over time, it should become increasingly challenging for Saudi Arabia to ?overproduce? and bring down prices to punish wayward OPEC members; without this disciplinary mechanism, it is unclear whether OPEC can remain cohesive,? according to the Citigroup report.
For its part, OPEC professes to be not unduly alarmed by the U.S. oil and natural gas boom. It highlights the "considerable uncertainties" surrounding wells drilled using hydraulic fracturing, or ?fracking,? and associated technologies.
Yergin said he believes that the Saudis will be able to withstand the turbulence, and that they will provide a buffer for the organization?s lesser producers.
?It's too quick to write the obit for OPEC,? he said. ?? The Saudis will figure it out. They are re-orientated to Asian markets, turning left instead of right.?
New technology is creating a boom in energy extraction in the Permian Basin. For most residents, it's a welcome boost to the economy.
But some members of the oil cartel -- particularly Nigeria and Angola -- already are feeling the impact of the U.S. production surge, according to the Citigroup report. U.S. imports from the two countries dropped to 700,000 barrels a day at the end of 2012, down from 1.6 million barrels in 2007. That?s because U.S. production of light, sweet crude -- the kind of oil the West African nations produce -- has burgeoned in recent years. Citigroup forecasts that by the end of 2013, the market for Nigerian oil at Gulf Coast refineries could entirely dry up.
Longer term, say by 2020, cheaper heavy oil from Canada, freed from the so-called oil sands by new recovery technologies, could push similar oil from Venezuela out of the U.S. Gulf Coast market, (assuming the Obama administration approves construction of the Keystone
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yeh lets worry about OPEC who have been holding the world hostage with billions while they build an oasis in the deserts.
yeh lets cry about their loss
wtf do these ppl think
