The American shale boom has flooded the United States with vast new supplies of oil and gas, and that has been an obvious and undeniable boon to the American economy. But the shale revolution’s effects are being felt the world over, as evidenced by a recent comment from the head of the Energy Information Administration (EIA) that a barrel of oil, currently hovering just under $100, would run you $150 if it weren’t for this sudden, fracking-enabled black gold rush. Reuters reports:
Oil output from the oil-rich Bakken, Permian and Eagle Ford shale formations in those two states, as well as other smaller formations around the nation, has spiked in the past decade to more than 4 million barrels per day.That new oil has helped the United States weather supply disruptions from Libya, Iraq and other one-time major oil producers in which political and military turmoil has sharply depressed production, Sieminski said ahead of the North Dakota Petroleum Council’s annual meeting.“If we did not have the growth in North Dakota, in the Eagle Ford and the Permian, oil could be $150 (per barrel),” [U.S. Energy Information Administration chief Adam Sieminski] said. “There is a long list of countries with petroleum outages that add up to about 3 million barrels per day.”
New American supplies have come onto the market just as disruptions from major producers like Libya and Iraq have threatened supplies abroad. In some ways, it’s difficult to appreciate the impact of American oil because the price per barrel has remained relatively unchanged in recent years, but that lack of movement is itself evidence of the profound stabilizing power of the shale boom.There’s also a geopolitical bonus to this economic stability: many of the world’s petro-states rely heavily on a high price of oil to balance their budgets. These break-even prices vary country to country, but many analysts believe that bellicose Moscow can’t shore up its budget without an oil price at or above $105–110 per barrel. New sources of U.S. oil are preventing price spikes that would be a boon to Russia, and in that way are constraining Moscow’s choices. So much has been made of Vladimir Putin’s energy weapon, his ability to cut off gas to Europe. But America has one of its own.Frack, baby, frack.