mead cohen berger shevtsova garfinkle michta grygiel blankenhorn
Oil Provides Options
This Is What Energy Security Looks Like

Shale energy boosters like to highlight the fact that it will make us more energy independent. Thanks to fracking, they say, the United States won’t need to rely on foreign sources of oil for much longer.

It’s a nice-sounding story, but unfortunately it’s also a myth. Even if the United States produced all of the oil and gas it consumed, the price we would pay for oil would still be vulnerable to shocks from supply disruptions abroad. Barring some sort of move to oil isolationism (which, even if it were possible, would be very troubling to our allies), or a complete transition away from oil as an energy source, this is a reality we have to live with. But while true energy independence is sheer fantasy, there are plenty of benefits to having a burgeoning supply. Consider the following chart:

Chart by Lindsey Burrows

Notice how, compared to the five-year range, the price of oil last year was relatively stable. Despite a number of disruptions to important oil supplies in Nigeria and Libya, and worries that the situation in Syria would continue to expand beyond its borders, the per-barrel price of oil was on a more or less even keel. This is largely because of America’s growing oil wealth, which had the effect of stabilizing the market. With Mexico’s oil reforms paving the way for a hydrocarbon renaissance to our south, North America is becoming a major player in the international oil market, and that is softening the edges of price spikes.

The chart below illustrates the growth and contraction in oil supply capacities around the world last year:

Chart by Lindsey Burrows

Chart by Lindsey Burrows

OPEC struggled, but the American shale boom helped offset those problems. As a result, the impact of OPEC supply contraction on the price of oil was muted. Not only is that a boon to the global economy, it gives the United States more foreign policy options. That flexibility is one of fracking’s greatest gifts. We’ll probably never be truly energy independent, but we’re certainly enjoying a great deal more energy security than in years past.

Features Icon
show comments
  • Corlyss

    Back in 2005-6 Batchelor used to open his nightly broadcasts with “Energy Secruity! Doesn’t exist!” and move directly in the latest story of some middle-east h*l*l-hole that was interfering with the oil market.

  • Jacksonian_Libertarian

    The Energy Information Agency has consistently and massively underestimated the development of US oil resources. Not only are more and more wells on private land being developed but the productivity of the new wells continues to increase (which makes them much more profitable, and drops the break even point from ~$80 per barrel to ~40 per barrel). Also, the development of Government owned land has yet to be begun because of Obama blocking at the National level, and Democrats blocking at the State level in places in the North East, and California. The trends at the moment are for even more added production next year than were added this year, and the year after that, so that 2 years from now production will be 3+ million barrels higher than it is now. There is no reason to expect US production to stop increasing until it actually does stop. I expect production to continue to rise until a supply glut forces prices down enough to make new development unprofitable.

  • Jim__L

    And yet, the Obama administration’s policies somehow keep gas at $4/gallon.

    Heckuva job, Barry.

  • Nick

    Energy security is not just having our own source of oil. Its keeping the dollars here, jobs here, and reducing the flow of dollars to terrorist supporting groups. In 2002, all my friends couldn’t ask me to shut up enough about how we had to develop our own resources, including gas and oil, and to develop nuclear power, in order to get us away from dependence upon foreign sources. Now, over ten years later, they ask me, how did you know???

    I’m surprised that one of my most thoughtful and bright sources of news didn’t include this….

  • free_agent

    You write, “Barring some sort of move to oil isolationism”.

    I can easily imagine a move to oil isolationism if the US becomes a net exporter. If some foreign supply disruption causes US oil prices to spike, the temptation to limit exports (shifting the pain from citizens to foreigners) will be immense. Didn’t we have a ban on exporting LNG until recently?

© The American Interest LLC 2005-2016 About Us Masthead Submissions Advertise Customer Service