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Frack Baby Frack
Plunging Oil Prices Are a Geopolitical Boon for the U.S.

The price for a barrel of oil plunged below $100 a barrel recently, hitting a more than two year low on weak demand forecasts from the IEA. This price decline is coming despite rising tensions in oil-producing parts of the world, and the U.S. shale boom surely deserves some credit for warding off price spikes in the wake of ISIS incursions in Iraq and a deteriorating situation in Libya. But America isn’t just partly responsible for these depressed prices—it is also a beneficiary of a strategic advantage these low prices bring. Reuters reports:

Russia and Iran are heavily reliant on oil sales and face budget shortages at current price levels, analysts say, weakening their position when negotiating over Ukrainian sovereignty or the Iranian nuclear deal. […]

“The increase in production is definitely benefiting the United States,” said Professor Paul Stevens at the Chatham House think tank in London.

“The Russians are very exposed to lower oil prices. We don’t know to what extent it will influence their behavior in Ukraine, but they’re certainly going to feel pressure on their budget.”

Petro-states need high oil prices to balance their budgets, but a flood of fracked American crude is threatening these countries’ ability to stay solvent. Analysts believe Russia needs an oil price of around $105 to $110 to break even, but other regimes require even higher prices. The shale boom has decreased American reliance on foreign sources of oil and gas, but by keeping oil prices low, it’s also undermined the security of regimes abroad.

Fracking brings with it plenty of economic benefits—cheap energy is essential for economic growth—but it’s done much more than that. Booming American oil production is giving us more options abroad while simultaneously constraining those of countries like Russia, and that’s certainly worth celebrating.

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  • ShadrachSmith

    The single greatest irony in Obama’s presidency, an energy boom.

    • CaliforniaStark

      The single greatest lesson; the energy boom was the result of free enterprise.

    • Pete

      America’s energy boom happened in spite of Obama AND the Democrats, not because of them.

  • Duperray

    You just did’nt consider the key factor of american oil fracking: Cost, requiring – as per american liiterature – a minimum selling price of $100 a barrel to remain profitable.
    Please always consider the TWO faces of a coin.

    • Andrew Allison

      According to, the marginal cost of producing a barrel U.S. shale oil is $77, but OPEC needs an average of $106 to meet budgetary requirements.

      • PKCasimir

        Actually, the Rueters article claims that the marginal cost of US shale oil is $70-$77 a barrel.

    • PKCasimir

      You are totally wrong. Depending on the location, the break even point for a barrel of US “fracked” oil is $60-$80 a barrel and this is according to an IEA that has been behind the power curve when it comes to fracking in the US, has consistently underestimated the amount of oil the US can recover from fracking, and consistently over-estimated the price of extraction.
      The US oil industry can make a profit with oil at $70- $75.
      The other side of the coin is that the US has recovered so much natural gas that the price has become so depressed that wells have been capped. The US is afloat in natural gas. It will take several years for LNG export terminals to come into operation but once they do, Russia will have a hard time staying solvent.

  • TheRadicalModerate

    We’ve gotten to used to the idea that price is all that matters. Yes, oil and gas are fungible commodities, and a change in supply in one part of the world affects the price everywhere. But there are also logistical issues at play and our strategic interests are at risk because of them.

    We can hurt Russia a little bit by reducing the price of oil and gas, but they still have the ability to turn a couple of valves and make Europe cold and dark. Their geographic advantage and their delivery infrastructure are huge weapons. It doesn’t matter to the Europeans if oil is $90/bbl and natural gas is $40/kJ if they don’t have the tanker terminals to get the stuff into central and eastern Europe. And it doesn’t matter to the US if it doesn’t have LNG manufacturing and terminal capacity.

    The US is busy squandering this immensely powerful foreign policy tool because nobody is viewing LNG and terminal infrastructure as a strategic necessity. This is fixable in short order, but it requires some real government initiative, both to defray the construction risk and to keep a lid on the NIMBYs and the BANANAs.

    • Duperray

      At least one objective sta

  • PapayaSF

    Not that I’m complaining about lower oil prices, but could it be that one reason for the drop is the poor world economy? Which is not a boon to the US.

  • robertmeerdahl

    think how much more energy we could produce if Obama did not ban fracking on federal lands, or be less hostile to offshore production in the gulf of mexico

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