Oil future
Fracking predictions come true as markets react, but not overreact, to chaos in Iraq.
The self-proclaimed Islamic State of Iraq and Syria has sent oil markets into a shock as Sunni extremists try to carve out their own nation in the Middle East. This neo-Taliban has seized major cities, weapons and wealth, but the rising oil prices are more about uncertainty than immediate disruptions to the oil supply. While ISIS has attacked a key Iraqi refinery, it is largely used for domestic production. Major oil fields remain secure either in de facto Kurdistan in the north, or Shiite-controlled south.
Still, an army of Medievalminded religious radicals deemed too extreme for al-Qaida trying to conquer OPEC’s second-largest oil exporter should be enough to justify a higher-risk premium on every barrel. Even shutting off one-third of Iraq’s production would essentially eliminate global spare capacity, according to a new report from Securing America’s Future Energy, sending prices skyrocketing.
It used to be that these sorts of disruptions would put the United States on a red alert. Saddam Hussein’s invasion of oil-rich Kuwait once sent our nation to war. While concern lingers in the air, there’s a sense of calm stateside that seems eerily out of place. This is because we no longer rely on Middle East oil as we once did. Domestic oil exports hit a 15-year high in April, and we’re producing more oil than we’re importing. Canadian drilling and an optimistic energy plan for Mexico help shore up secure petroleum sources. China has replaced the United States as the biggest Middle East oil importer.
Fracking fans have argued for years that increased domestic production would sever the oil and gas chain that petro-despots could use to threaten the United States. Now we’re seeing exactly what that means: Iranian sanctions do not shock prices; we have more flexibility in responding to Middle East chaos; a U.S. supply-buffer calms price panics.
Strides in energy efficiency compound these gains, with green ideas multiplying the policy power of red-state drilling. This incredible combination of oft-conflicting agendas — reducing consumption while increasing production — has revolutionized the energy world.
These developments did not happen by accident. Engineers, environmentalists, businessmen and politicians have worked to put in place this framework of higher production and improved efficiency. We are essentially living in a fracking future of our own creation.
It is time to take things to the next step. Opening more federal lands to energy exploration will keep U.S. production on track. Approving more oil and gas exports would help steady worldwide prices.
Tightening relations with our neighbors to the north and south could create a veritable North American Energy Union, which would serve as a source of stable resources in a chaotic world. This means, among many things, approving the Keystone XL Pipeline connection with Canada.
The United States also needs to take major steps in reducing our reliance on fossil fuels. For example, unnecessary regulations often stifle the use of solar panels for homes and offices, and state and local governments should work to reduce the costs of permitting and inspections.
What seem like contradictory goals work hand-in-hand for the energy security of our nation, and the world.
It used to be that these sorts of disruptions would put the United States on a red alert. Saddam Hussein’s invasion of oil-rich Kuwait once sent our nation to war.