U.S. presidents from Nixon to Biden have decried OPEC's cartel influence on the global oil market and touted energy independence to get away from it. More often than not, that independence included ramping up drilling in the United States.
But starting under President Barack Obama, especially, energy independence came to be associated with Americans weaning themselves from fossil fuels. Solar power and electric vehicles were en vogue.
The Council on Foreign Relations, a nonprofit think tank based in New York, believes OPEC does face a legitimate threat, but not from solar or even electric vehicles. At least for now. CFR's recently revised OPEC file reports that the group sees "unconventional oils" (aka hydraulic fracturing, aka fracking) as that threat.
After an almost four-decade decline in the production of U.S. crude oil, the extraction of oil from sandstone and shale reversed that trend starting in 2009. In the following decade, U.S. production from fracking more than doubled to just more than 400,000 barrels by 2020.
Fracking comes with its own environmental concerns. And they aren't nothing. But the fracking revolution shows what can happen in free societies when markets drive innovation, and inventors and investors see a need to fill.
And the "shale revolution" continues, according to CFR. By 2018, the U.S. was the world's largest oil producer. In fact, in 2022 the U.S. was producing 11.6 million barrels per day in total, ahead of Russia (10.5 million) and Saudi Arabia (10.2 million). No other country produces even half as much as the top three.
OPEC holds about 73 percent of the world's oil reserve supply, led by Venezuela and Saudi Arabia, and the U.S. remains the world's largest oil consumer at 17.2 million barrels a day--followed by China at 14.2 million. No surprise there.
Oil production in the U.S. has rebounded from a slight pandemic dip, despite President Biden's pledges to stop all drilling and fracking on public lands. Mr. Biden has not followed through on such pledges; drilling permits issued under his administration have already outpaced those of his predecessor.
Sometimes, reality on the ground trumps all else.
In 2019, an "OPEC+" coalition of Russia and nine other countries was created to offset this surge of U.S. oil. OPEC and its new junior varsity agreed to curb oil production by 1.2 million barrels a day with the aim of keeping prices higher and building inventory.
Then the pandemic reduced demand, dropping the price of oil to its lowest point in nearly 20 years. U.S. shale production slumped. Now, six months into Russia's invasion of Ukraine, sanctions imposed by the West have driven prices up to more than $5 a gallon in some U.S. cities, and as CFR notes, "renewed attention on OPEC's role."
Industry experts say it'll take a little time to get production ramped back up, and CFR suggested the U.S. may end up looking to OPEC for oil.
OPEC's foundation has shown signs of cracking in recent years, though. The membership roster currently sits at 13 after Qatar, which had joined in 1961, withdrew over squabbles with Saudi Arabia, OPEC's de facto leader. The Saudis' more "assertive foreign policy" is expected to rankle more OPEC feathers. In 2020, the Saudis and Russia clashed over pricing.
OPEC was formed more than a half century ago as an alternative to what amounted to an OPEC of the West. The "Seven Sisters" dominated the global industry from the mid-1940s to the mid-1970s. Its roster? Anglo-Iranian Oil (now BP); Royal Dutch Shell (now just Shell); Standard Oil of California (later, Chevron); Gulf Oil (merged into Chevron); Texaco (again, merged into Chevron); Standard Oil of New Jersey (Esso, then Exxon, then ExxonMobil); and Standard Oil of New York (Socony, then Mobil, then ExxonMobil).
Prior to 1973, these companies controlled roughly 85 percent of the world's petroleum reserves. You could have called them, together, a cartel.
Green is good; it's necessary for our long-term future. But it takes time. (And it buys votes.) But black gold still makes the world go 'round. For now, at least.
For as long as it does, shouldn't we prefer that it come from American shale or wells than from Saudi sands?