The US is undergoing a dramatic shift that didn’t even exist 10 years ago. As of last year, the US was the world’s 3rd largest oil producer, right behind Saudi Arabia and Russia. If it continues at its current pace, America will become the world’s largest oil producer, dwarfing most other oil-producing countries around the world. That’s right, the country that used to be the world’s largest consumer of oil is now flipping the market on its head and sending oil to other nations. While we still are importing a fair bit from others, that number has fallen from 60% of all our oil consumed to only 20%, and that too will continue to fall.
This has had numerous effects worldwide and here in the country, both politically and economically. While the environmental effects of fracking (the process American producers have perfected to extract oil from shale, the cause of the boom) are questionable at best, the other effects for Americans is undeniable.
In December 2015, Congress passed a law lifting a 40 year ban on oil exports, and in January 2016, the first shipments of crude oil landed in Europe, starting a tidal wave of oily gold that’s on track to make us a net exporter in the next couple of years.
For the US and its allies, the resurgence of the domestic oil sector has helped shift the “price making” control out of the hands of OPEC (Organization of Petroleum Exporting Countries, which American companies are forbidden to join by the government) and into the hands of local producers. Since many OPEC countries derive the majority of their national income from the sale of oil, any decrease in the global price of petroleum or their market share essentially shrinks their budget, causing deficits and even politically lethal consequences, depending on the nation in question.
In an attempt to crush the myriad privately owned drillers scattered across the US, OPEC as a whole pumped up production, driving down the price of oil in an attempt to bankrupt American drillers. Instead of killing domestic production however, the low prices forced companies to adapt, employing new technologies and inventing others in order to drive down their own costs of drilling. OPEC members, on the other hand, couldn’t keep up the squeeze forever, as each passing day meant losing more and more money. Finally, OPEC relented, and went the other direction, cutting production to push up prices. This meant though, that every time an OPEC nation cut production to raise prices, US producers just expanded production, taking advantage of their ever increasing market share.
What does this mean for us here at Union? Not a whole lot at the moment, actually (unless you or someone else works in the oil industry or a new boom-town). Since much of America’s oil is going overseas to places like China, Europe and even previous oil-producing king Saudi Arabia, instead of being sold here in the US, prices aren’t being driven down as much as they could be.
On the other hand, if an event such as the 1970s embargo occurs again, America now has much more control over what happens, effectively mitigating the effects of an overseas catastrophe. While this doesn’t mean America won’t be receiving oil from friends and rivals anymore, they also won’t have as much of an effect on our price at the pump.
Jesse Shoghi is a junior studying computing.