Oil's Swift Fall Raises Fortunes of U.S. Abroad

Transformations of global petroleum politics underway.

I love it!

At the New York Times, "Oil’s Swift Fall Raises Fortunes of U.S. Abroad":

BRUSSELS — A plunge in oil prices has sent tremors through the global political and economic order, setting off an abrupt shift in fortunes that has bolstered the interests of the United States and pushed several big oil-exporting nations — particularly those hostile to the West, like Russia, Iran and Venezuela — to the brink of financial crisis.

The nearly 50 percent decline in oil prices since June has had the most conspicuous impact on the Russian economy and President Vladimir V. Putin. The former finance minister Aleksei L. Kudrin, a longtime friend of Mr. Putin’s, warned this week of a “full-blown economic crisis” and called for better relations with Europe and the United States.

But the ripple effects are spreading much more broadly than that. The price plunge may also influence Iran’s deliberations over whether to agree to a deal on its nuclear program with the West; force the oil-rich nations of the Middle East to reassess their role in managing global supply; and give a boost to the economies of the biggest oil-consuming nations, notably the United States and China.

It might even have been a late factor in Cuba’s decision to seal a rapprochement with Washington.

After a precipitous drop, to less than $60 a barrel from around $115 a barrel in June, oil prices settled at a low level this week. Their fall, even if partly reversed, was so sharp and so quick as to unsettle plans and assumptions in many governments. That includes Mr. Putin’s apparent hope that Russia could weather Western sanctions over its intervention in Ukraine without serious economic harm, and Venezuela’s aspirations for continuing the free-spending policies of former President Hugo Chávez.

The price drop, said Edward N. Luttwak, a longtime Pentagon adviser and author of several books on geopolitical and economic strategy, “is knocking down America’s principal opponents without us even trying.” For Iran, which is estimated to be losing $1 billion a month because of the fall, it is as if Congress had passed the much tougher sanctions that the White House lobbied against, he said.

Iran has been hit so hard that its government, looking for ways to fill a widening hole in its budget, is offering young men the option of buying their way out of an obligatory two years of military service. “We are on the eve of a major crisis,” an Iranian economist, Hossein Raghfar, told the Etemaad newspaper on Sunday. “The government needs money badly.” ...

In many ways, the recent price fall really is the United States’ work, flowing to a large extent from a surge in American oil production through the development of alternative sources like shale.

By offsetting declines in conventional oil production, increases in shale oil output have allowed overall American crude oil production to rise to an average of about nine million barrels a day from five million a day in 2008, according to the United States Energy Information Administration. That four-million-barrel increase is more than either Iraq or Iran, the second- and third-largest OPEC producers after Saudi Arabia, produces each day, and it has put strong downward pressure on world prices...

That's what I'm talking about!

Keep reading.

Despite Obama, Plunging Oil Prices Spur U.S. Economy to Stongest Growth in Decade

Just think how much stronger our economy would be doing if we had a pro-growth president.

At LAT, "U.S. growth is strongest in a decade":

The U.S. is rolling into the new year with impressive strength as plunging oil prices have ignited consumer spending and helped fuel the best stretch of growth in more than a decade — even as economies around the world are struggling.

A basketful of mostly upbeat economic data Tuesday pushed financial markets to record highs, with the Dow Jones industrial average breaking through the 18,000-point barrier for the first time.

Investors were spurred by a Commerce Department report that the U.S. economy expanded at a remarkable 5% annual rate in the third quarter, the fastest pace since 2003 and a far cry from the tepid growth that has plagued most of the recovery from the Great Recession.

"This is literally shoot-the-lights-out sort of stuff," said Chris Rupkey, chief financial economist at Union Bank in New York. "This economy is pretty much roaring."

And the third quarter wasn't a fluke.

Total economic output, also known as gross domestic product, expanded at a 4.6% annual rate in the second quarter. It marks the first time the economy posted back-to-back quarters of more than 4.5% growth since 2003.

Economists don't expect the torrid pace to continue. The fourth quarter will probably keep the positive momentum, but at a more modest 2.5% to 3%.

With gasoline prices plummeting, Americans are feeling the difference in their bank accounts. Consumer spending jumped in November as incomes continued to rise.

And with a leading measure of consumer confidence on Tuesday hitting its highest level since 2007, signs point to strong spending carrying into next year, economists said.

"The U.S. economy prior to the oil price decline was doing reasonably well. It was chugging along," said Brian Bethune, chief economist at Alpha Economic Foresights.

"Then we get an accelerator, which is the drop in oil prices," he said. "It's equivalent to a big tax cut — and the tax cut is getting larger."

Although oil prices rose Tuesday — partly because strong U.S. growth signaled increased demand — they have fallen nearly 50% over the last six months.

That's caused the average price for a gallon of regular to drop to $2.38 a gallon, according to AAA. That's down 15 cents in just a week and 87 cents from a year ago.

The savings at the gas pump have boosted consumer spending, which rose 3.2% in the third quarter. Those figures beat an earlier estimate, and rose from 2.5% in the previous quarter. A big factor was an increase in spending on healthcare.

Heh. I just love it when the economy defies the leftist program of economic stagnation.

More.

EARLIER: "U.S. Fuel Costs Drop to Historic Lows, Thanks to Shale Oil Boom — And No Thanks to Obama!"

Saudi Arabia Fears U.S. Shale Oil

At WSJ, "Why Saudis Decided Not to Prop Up Oil: In American Shale Oil, A Perceived Threat to OPEC Market Share":

In early October, Saudi Arabia’s representative to OPEC surprised attendees at a New York seminar by revealing his government was content to let global energy prices slide.

Nasser al-Dossary ’s message broke from decades of Saudi orthodoxy that sought to keep prices high by limiting global oil production, said people familiar with the session. That set the stage for Saudi Arabia’s oil mandarins to send crude prices tumbling late last month after persuading other members of the Organization of the Petroleum Exporting Countries to keep production steady.

Hard-hit countries like Iran, Russia and Venezuela suspected the move was a coordinated effort between the oil kingdom and its longtime ally, the U.S., to weaken their foes’ economies and geopolitical standing.

But the story of Saudi Arabia’s new oil strategy, pieced together through interviews with senior Middle Eastern, American and European officials, isn’t one of an old alliance. It is a story of a budding rivalry, driven by what Saudi Arabia views as a threat posed by American energy firms, these officials said...

Once again, I just love the news out on global energy markets. It makes the idiot global warming ghouls look more idiotic than they usually do --- and that's saying something.

More at the link.

Stocks Tumble After Weak Oil Forecast

At WSJ, "How Crude Oil’s Global Collapse Unfolded: Tracing the Plunge In Oil Prices Back to Texas":

Since the 1970s, Nigeria has sent a steady stream of high-quality crude oil to North American refineries. As recently as 2010, tankers delivered a million barrels a day.

Then came the U.S. energy boom. By July of this year, oil imports from Nigeria had fallen to zero.

Displaced by surging U.S. oil production, millions of barrels of Nigerian crude now head to India, Indonesia and China. But Middle Eastern nations are trying to entice the same buyers. This has set up a battle for market share that could reshape the Organization of the Petroleum Exporting Countries and fundamentally change the global market for oil.

On Friday, crude prices dropped to their lowest level in five years after the International Energy Agency cut its forecast for global oil demand for the fifth time in six months. That signaled to investors that the world economy would struggle in the coming year, sending the Dow Jones Industrial Average tumbling by 315.51 points, or 1.8%, to 17280.83. That’s the Dow’s biggest weekly percentage loss in three years.

Since June, the IEA has cut its demand forecast for 2015 by 800,000 barrels, while it says U.S. oil output will rise next year by 1.3 million barrels a day.

The drop in global oil prices from over $110 a barrel to under $62 on Friday has been portrayed as a showdown between Saudi Arabia and the U.S., two of the world’s biggest oil producers. But the reality is more complex, involving Libyan rebels and Indonesian cabdrivers as well as Texas roughnecks and Middle Eastern oil ministers. It reflects both the surging supply of crude and the crumbling demand for oil.

And the oil-price plunge may not end soon. Bank of America Merrill Lynch says U.S. oil prices could drop to $50 in 2015.

The roots of the price collapse go back to 2008 near Cotulla, Texas, a tiny town between San Antonio and the Mexican border. This was where the first well was drilled into the Eagle Ford Shale. At the time, the U.S. pumped about 4.7 million barrels a day of crude oil.

In 2009 and 2010, the global economy improved, demand for oil increased and crude prices rose, creating a large incentive to find new supplies. In Cotulla and elsewhere, U.S. drillers answered the call. “There was, for lack of a better term, an arms race for oil, and we found a ton of oil,” says Dean Hazelcorn, an oil trader at Coquest in Dallas.


Today, two hundred drilling rigs blanket South Texas, steering metal bits deep underground into the rock. Once drilled and hydraulically fractured, these wells yield large volumes of high-quality oil; at the moment, the U.S. is producing 8.9 million barrels a day, thanks to the Eagle Ford and other new oil fields.

Americans aren’t pumping more gasoline or otherwise using up all that new crude, and under U.S. laws dating back to the 1970s, it has been almost impossible to export.

As a result, American refineries snapped up inexpensive crude from Texas and North Dakota, using it to replace oil from Nigeria, Algeria, Angola and Brazil, and almost every other oil-producing nation except Canada.

OPEC sent the U.S. 180.6 million barrels in August 2008, a month before the first Eagle Ford well; in September 2014, it shipped about half that, 87 million barrels. That is about 100 fewer tankers of crude arriving in U.S. ports. They went elsewhere.

For a long time, it seemed like the world’s growing appetite for oil would soak up all the displaced crude. By 2011 prices began to hover between $90 and $100 a barrel and mostly stayed in that range.

But earlier this year, another trend began to come into focus, catching Wall Street energy analysts and other market watchers by surprise. In March, many analysts predicted global demand for crude oil would grow by 1.4 million barrels a day in 2014, to 92.7 million barrels a day.

That prediction proved wildly optimistic...

More.

The Death of OPEC

At Astute Bloggers, "$50 Per Barrel Oil Is Coming: 'OPEC No Longer Exists In Any Meaningful Sense'."

Bolstered by GOP Electoral Wins, Oil, Gas and Coal Lobbyists Plan Fresh Push Against Climate Rules

At WaPo, "Fossil-fuel lobbyists, bolstered by GOP wins, work to curb environmental rules":

Oil, gas and coal interests that spent millions to help elect Republicans this year are moving to take advantage of expanded GOP power in Washington and state capitals to thwart Obama administration environmental rules.

Industry lobbyists made their pitch in private meetings last week with dozens of state legislators at a summit of the American Legislative Exchange Council (ALEC), an industry-financed conservative state policy group.

The lobbyists and legislators considered several model bills to be introduced across the country next year, designed to give states more power to block or delay new Obama administration environmental standards, including new limits on power-plant emissions.

The industry’s strategy aims to combat a renewed push by President Obama to carve out climate change as a top priority for his final two years in office. The White House has vowed to continue using executive authority to enact more environmental limits, and the issue is shaping up to be a major flash point heading into the 2016 presidential election.

With support from industry lobbyists, many Republicans are planning to make the Environmental Protection Agency a primary political target, presenting it as a symbol of the kind of big-government philosophy they think can unify social and economic conservatives in opposition...

More.

Sheikhs vs. Shale: The New Economics of Oil

At the Economist:

THE official charter of OPEC states that the group’s goal is “the stabilisation of prices in international oil markets”. It has not been doing a very good job. In June the price of a barrel of oil, then almost $115, began to slide; it now stands close to $70.

This near-40% plunge is thanks partly to the sluggish world economy, which is consuming less oil than markets had anticipated, and partly to OPEC itself, which has produced more than markets expected. But the main culprits are the oilmen of North Dakota and Texas. Over the past four years, as the price hovered around $110 a barrel, they have set about extracting oil from shale formations previously considered unviable. Their manic drilling—they have completed perhaps 20,000 new wells since 2010, more than ten times Saudi Arabia’s tally—has boosted America’s oil production by a third, to nearly 9m barrels a day (b/d). That is just 1m b/d short of Saudi Arabia’s output. The contest between the shalemen and the sheikhs has tipped the world from a shortage of oil to a surplus...

Keep reading.

'Peak Oil' Debunked, Again

Love!

At the Wall Street Journal, "The world relearns that supply responds to necessity and price":

It has been 216 years since Thomas Malthus gave birth to the idea that mankind’s appetite for natural resources would outstrip nature’s capacity to supply them. There have since been regular warnings that the world is running out of soybeans, helium, chocolate, tunsgsten, you name it—and that population growth has become unsustainable. The warnings create a political or social panic for a while, only to be proved wrong.

The latest reckoning with reality is the end of the obsession with “peak oil,” which for years had serious people proclaiming that we were entering an era of permanent fossil fuels scarcity. It didn’t work out that way.

That’s a central lesson from this year’s dramatic fall in the price of oil, which reached $69.49 a barrel of Brent crude on Thursday from a June high of $112.12. As recently as early November, when oil hovered at $80, OPEC officials warned they would intervene to hold the price at $70. But Saudi officials conspicuously refused to support an output cut at last week’s OPEC meeting, and Saudi oil minister Ali al-Naimi has made clear that he’d be comfortable with lower prices.

The short-term Saudi calculation is to drive oil prices down to squeeze their geopolitical adversaries and higher-cost producers. That goes especially for their adversaries across the Persian Gulf in Iran, which depends on oil exports for over 40% of its revenues, and where the regime had designed its budget based on $100 oil.

The Saudis also hope to slow the explosive growth of U.S. production, which, thanks to the tapping of domestic shale resources through the combination of horizontal drilling and hydraulic fracturing, has risen to some nine million barrels a day from five million in 2008. By some estimates, the price of oil needs to be as high as $90 a barrel for oil extracted from “tight” deposits such as shale, though oil market research firm IHS believes most tight oil wells have a break-even cost of between $50 and $69 dollars a barrel.

But even if the Saudi move slows U.S. drilling, the International Energy Agency forecasts that U.S. production will still surpass Saudi Arabia’s output of 9.7 million barrels a day, and overtake Russia’s 10.3 million, perhaps sometime next year. This would make America the world’s largest oil producer, which it was from the dawn of the oil age through 1974. Thanks to the fracking boom, the U.S. surpassed Russia as the world’s largest natural-gas producer in 2013.

All this is a useful reminder, as IHS’s Daniel Yergin told us the other day, that “technology responds to need and to price.” It was the same story in the 1970s, when the world responded to OPEC’s embargoes by exploiting new resources in Alaska and the North Sea, and again in the 1980s and 1990s, when offshore drilling became technologically feasible and economically profitable at ever-greater depths. And expect more from where that came, as the frackers continue to figure out how to drive down costs, and if new shale deposits in places such as Mexico, Ukraine and Argentina start to be exploited...

More.

The Global Shakeout from Plunging Oil

From Daniel Yergin, at the Wall Street Journal, "New supply—rather than demand—is dominating the market, and OPEC has been caught by surprise":

The decision by members of the Organization of the Petroleum Exporting Countrieson Thursday not to cut production reflects a profound shift in the world oil market. The demand for oil—by China and other emerging economies—is no longer the dominant factor. Instead, the surge in U.S. oil production, bolstered by additional new supply from Canada, is decisive. This surge is on a scale that most oil exporters had not anticipated. The turmoil in prices, with spasmodic plunges over the past few days, will likely continue.

Since 2008—when fear of “peak oil,” after which global output would supposedly decline, was the dominant motif—U.S. oil production has risen 80%, to nine million barrels daily. The U.S. increase alone is greater than the output of every OPEC country except Saudi Arabia.

The world has experienced sudden supply gushers before. In the early 1930s, a flood of oil from East Texas drove prices down to 10 cents a barrel—and desperate gas station owners offered chickens as premiums to bring in customers. In the late 1950s, the rapidly swelling flow of Mideast oil led to price cuts that triggered the formation of OPEC.

And in the first half of the 1980s, a surge in oil from the North Sea, Alaska’s North Slope and Mexico caused prices to plunge to $10 a barrel. That posed a much greater crisis for OPEC than today: Over those same years, global demand fell by more than two million barrels a day owing to a deep recession, greater conservation and the switch to coal from oil for electricity generation. This time world oil demand is still growing, but weakly.

For the past three years, oil prices hovered around $100 a barrel as disruptions in Libya, South Sudan and elsewhere, and sanctions on Iranian exports, eerily balanced out the production increases from the U.S. and Canada. But the slower global economic growth that became apparent a few months ago was accompanied by weaker demand for oil, just when Libya suddenly quadrupled output to almost a million barrels a day. The result: Prices weakened in September and then tumbled.

OPEC’s decision last week reflects the conviction of its “have” nations—the Persian Gulf countries, with very large financial reserves—that cutting output would mean losing market share, particularly to Iran and to what they see as Iran-dominated Iraq. Instead, they have adopted a strategy of leaving it to the market for now; OPEC is waiting, in the words of Saudi Oil Minister Ali al-Naimi, for the oil market “to stabilize itself eventually.”

It is now clear that the new U.S. production is more resilient than anticipated. There has been a widespread view that at around $85 or $90 a barrel extracting “tight” oil from shale would no longer be economical. However, a new IHS analysis based on individual well data finds that 80% of new tight-oil production in 2015 would be economic between $50 and $69 a barrel. And companies will continue to improve technology and drive down costs...

Still more.

PREVIOUSLY: "Energy Quakes as OPEC Stands Pat."

Energy Quakes as OPEC Stands Pat

Lots going on in energy markets this week.

Here's WSJ, "Oil Stocks and the Currencies of Major Oil-Producing Nations Tumble":

Energy company stocks and the currencies of major oil-producing nations stumbled Friday as OPEC’s decision to maintain crude output levels despite a glut rippled across the globe.

The Organization of the Petroleum Exporting Countries’ decision knocked down U.S. benchmark oil prices on Friday by 10% to $66.15 a barrel, the lowest level since September 2009.

Uneasy investors dumped energy stocks. Among the hardest hit were U.S. domestic oil producers including Continental Resources Co., the biggest producer in North Dakota’s Bakken Shale. Its shares plunged on Friday nearly 20%, to $40.98.

Exxon Mobil Corp. fell 4.2%, BP PLC dropped 5.5% and Royal Dutch Shell PLC lost 7%, all in abbreviated New York trading.

Currencies of most major oil producing nations, including Russia, Nigeria and Canada, weakened. The Russian ruble tumbled almost 3% to an all-time low of 50.57 to the dollar, before recovering slightly. The Mexican peso slid to its weakest level versus the greenback in more than two years. Russia said it would revise or cut government spending.

Pascal Menges, a portfolio manager with Lombard Odier in Switzerland who has shares in U.S. shale oil producers, said OPEC’s decision “created a very uncomfortable situation” for oil companies that must decide whether to curb investments. He predicts the global oil oversupply will decline over the winter and U.S. production growth will slow, preventing prices from falling much more.

If that is the case, he said, the least-indebted North American shale companies should stay profitable. Still, he said, he has cut his fund’s investments in oil producers, moving some of the money to companies that buy and process oil.

This is economic warfare. And frankly, a last gasp from OPEC, as markets will reach equilibrium. Established U.S. producers will keep producing and investing. OPEC's income will decline along with the all of the rest.

According to the article:

Todd Staples, president of the Texas Oil & Gas Association, a trade group, said in a statement that low crude oil prices will impact some U.S. and global operations. Still, he expects prices to eventually stabilize. “We are confident the market will find an equilibrium,” he said.

Keep reading.

'North Dakota has shed its identity as an agricultural state in decline to become an oil powerhouse second only to Texas...'

This is the marquee front-page report at today's New York Times, "The Downside of the Boom."

It's interesting, although caveat emptor. If the Old Gray Lady can smear and destroy the Bakken oil boom, they certainly will. As with any major economic development, folks need to find a nice compromise between private-sector growth and public-sector regulation. As it is right now, it sounds pretty Wild West and laissez-faire.

U.S. Fuel Costs Drop to Historic Lows, Thanks to Shale Oil Boom — And No Thanks to Obama!

According to the Los Angeles Times, increased U.S. energy production, resulting from the shale boom, is forcing a structural change in U.S. energy markets, that --- along with decreased demand --- could result in a long-term decline in fuel costs.

And keep in mind, consumers and business owners have more disposable income with lower energy costs, which in turn boosts spending in other areas, like recreation and job hiring. (Oh, and of course the federal and state governments would raise much more in tax revenues from higher business earnings and job growth, which would reduce pressure to raise taxes --- but don't expect idiot progs to be touting these benefits any time soon).

In sum, a policy focus on expanding the U.S. energy sector would be a huge boom for Americans across the board. Instead, President "I'll Bankrupt the Coal Industry" Obama is looking to crush the energy sector in favor of a climate change legacy for his administration.

Americans opened their eyes to this abuse on November 4th, and if the Dems don't change their ways, they'll be looking at another ass-kicking in 2016.

In any case, see the Los Angeles Times, "Gasoline prices continue to drop":

How low can gas prices go?

In Southern California — and across the country — prices have been dropping for months, placing extra dollars in consumers' wallets. This week the average price for a gallon of regular hit $3.24 in Los Angeles and Long Beach, the lowest in four years, according to AAA. In Orange County, it was $3.19.

Energy analysts say it may go lower.

"We could see gasoline prices in the high 2s," said Amy Myers Jaffe, executive director of energy and sustainability at UC Davis.

Several factors are likely to get prices there, Jaffe said.

Oil production in the United States — driven by the nation's shale oil boom — is increasing. And on the demand side, the sluggish global economy has sent the price of crude steadily down.

In the U.S., where growth has been stronger, demographics and consumer habits are putting downward pressure on demand, analysts said...

The current decline is partly seasonal...

But the nation's shale oil boom should help drive down prices in 2015 across the state, with average prices potentially falling below $3 once next year's summer driving season ends, Kloza said.

"It's going to be a sloppy year next year for oil," he said. "On balance, crude oil prices should be the lowest they've been in four or five years."

The rise in oil production has been so great that the U.S. Energy Information Administration now predicts average daily production in 2015 will reach the highest level since 1972.

Low fuel prices have been a boon to consumers' pocket books, especially working- and middle-class Americans for whom gas accounts for a significant portion of their paychecks.

When prices were around $4 a gallon, Rita Mena paid as much as $80 to fill her Ford Explorer.

On Friday, at an Arco gas station in Boyle Heights, she shelled out $60.

With the extra money, the 32-year-old said, she can buy more of the things she needs, like groceries or diapers for her 2 1/2-year-old daughter, Leilani.

Then there's the luxuries.

"I want to go out more now," said Mena, who works at a downtown L.A. health clinic. "And maybe I could pick up an extra present or something for Christmas."

PREVIOUSLY: "The Geopolitical Consequences of the Shale Revolution."

The Geopolitical Consequences of the Shale Revolution

From Robert Blackwill and Meghan O'Sullivan, at Foreign Affairs, "America's Energy Edge":

Only five years ago, the world’s supply of oil appeared to be peaking, and as conventional gas production declined in the United States, it seemed that the country would become dependent on costly natural gas imports. But in the years since, those predictions have proved spectacularly wrong. Global energy production has begun to shift away from traditional suppliers in Eurasia and the Middle East, as producers tap unconventional gas and oil resources around the world, from the waters of Australia, Brazil, Africa, and the Mediterranean to the oil sands of Alberta. The greatest revolution, however, has taken place in the United States, where producers have taken advantage of two newly viable technologies to unlock resources once deemed commercially infeasible: horizontal drilling, which allows wells to penetrate bands of shale deep underground, and hydraulic fracturing, or fracking, which uses the injection of high-pressure fluid to release gas and oil from rock formations.

The resulting uptick in energy production has been dramatic. Between 2007 and 2012, U.S. shale gas production rose by over 50 percent each year, and its share of total U.S. gas production jumped from five percent to 39 percent. Terminals once intended to bring foreign liquefied natural gas (LNG) to U.S. consumers are being reconfigured to export U.S. LNG abroad. Between 2007 and 2012, fracking also generated an 18-fold increase in U.S. production of what is known as light tight oil, high-quality petroleum found in shale or sandstone that can be released by fracking. This boom has succeeded in reversing the long decline in U.S. crude oil production, which grew by 50 percent between 2008 and 2013. Thanks to these developments, the United States is now poised to become an energy superpower. Last year, it surpassed Russia as the world’s leading energy producer, and by next year, according to projections by the International Energy Agency, it will overtake Saudi Arabia as the top producer of crude oil.

Much has been written lately about the discovery of new oil and gas deposits around the world, but other countries will not find it easy to replicate the United States’ success. The fracking revolution required more than just favorable geology; it also took financiers with a tolerance for risk, a property-rights regime that let landowners claim underground resources, a network of service providers and delivery infrastructure, and an industry structure characterized by thousands of entrepreneurs rather than a single national oil company. Although many countries possess the right rock, none, with the exception of Canada, boasts an industrial environment as favorable as that of the United States.

The American energy revolution does not just have commercial implications; it also has wide-reaching geopolitical consequences. Global energy trade maps are already being redrawn as U.S. imports continue to decline and exporters find new markets. Most West African oil, for example, now flows to Asia rather than to the United States. And as U.S. production continues to increase, it will put downward pressure on global oil and gas prices, thereby diminishing the geopolitical leverage that some energy suppliers have wielded for decades. Most energy-producing states that lack diversified economies, such as Russia and the Gulf monarchies, will lose out, whereas energy consumers, such as China, India, and other Asian states, stand to gain.

The biggest benefits, however, will accrue to the United States. Ever since 1971, when U.S. oil production peaked, energy has been construed as a strategic liability for the country, with its ever-growing thirst for reasonably priced fossil fuels sometimes necessitating incongruous alliances and complex obligations abroad. But that logic has been upended, and the newly unlocked energy is set to boost the U.S. economy and grant Washington newfound leverage around the world.

THE PRICE IS RIGHT

Although it is always difficult to predict the future of global energy markets, the main effect the North American energy revolution will have is already becoming clear: the global supply of energy will continue to increase and diversify. Gas markets have been the first to feel the impact. In the past, the price of gas has varied greatly across the three largely distinct markets of North America, Europe, and Asia. In 2012, for example, U.S. gas prices stood at $3 per million BTU, whereas Germans paid $11 and Japanese paid $17.

But as the United States prepares to generate and export greater quantities of LNG, those markets will become increasingly integrated. Already, investors have sought government approval for more than 20 LNG export projects in the United States. However many end up being built, the exports flowing from them will add to major increases in the flow of LNG that are already occurring elsewhere. Australia is soon set to surpass Qatar as the largest global supplier of LNG; by 2020, the United States and Canada together could export close to Qatar’s current LNG capacity. Although the integration of North American, European, and Asian gas markets will require years of infrastructure investment and the result, even then, will not be as unified as the global oil market, the increased liquidity should help put downward pressure on gas prices in Europe and Asia in the decade ahead.

The most dramatic possible geopolitical consequence of the North American energy boom is that the increase in U.S. and Canadian oil production could disrupt the global price of oil -- which could fall by 20 percent or more...

Not the kind of baloney you hear from the sky-is-falling leftists, the dummkopfs.

But keep reading.