What do wildfires in Canada, avengers in Nigeria, and power outages in Iraq have in common? Together they’re disrupting oil production to the tune of more than 3 million barrels of oil per day. The EIA reports:
Unplanned global oil supply disruptions averaged more than 3.6 million barrels per day (b/d) in May 2016, the highest monthly level recorded since EIA started tracking global disruptions in January 2011. From April to May, disruptions grew by 0.8 million b/d as increased outages, largely in Canada, Nigeria, Iraq, and Libya, more than offset reduced outages in Kuwait, Brazil, and Ghana.
These are significant outages, and not just because they’re the highest in the five years that the EIA has been tracking them. Globally oil production is expected to average somewhere around 96 million barrels of oil per day in 2016, so current disruptions account for around 3.75 percent of the world’s total output, but if supply and demand were more or less even, we’d be seeing a much bigger spike than the $5 per barrel uptick we actually saw this past month. Instead, a global glut—driven largely by a large influx of new supplies from upstart American shale producers—has helped to weaken the impact of these disruptions in Canada, Nigeria, and Iraq.
But that’s not the only way shale producers can help bring more stability to the global market. Many fracking firms have had to halt production in the face of collapsing prices over the past two years, and in fact have drilled but not yet completed hundreds of wells, waiting for more favorable conditions (read: higher prices) before they actually restart production. That means that, should disruptions get significantly larger than they are today—enough to push prices back up to $100 per barrel—American companies will be able to once again start pumping crude as fast as possible. We’ve already seen what the shale boom can do when it’s in full swing, and in this sort of de facto swing production role it can help make up for disruptions abroad and blunt price spikes. That’s not just good for the United States—it’s a boon for global energy security.