WASHINGTON: Weaker oil prices have taken a toll here in the U.S. as well, of course, as companies have seen share prices, profits and jobs decline. But cheaper oil is good for the U.S. economy overall. In 2013 alone, fracking saved consumers as much as $248 billion in lower fuel prices, according to the Institute for Energy Research. That number has most certainly grown as oil prices have tumbled more than 50 percent since last summer.
This is the deal that fracking wrought. For the past several years, we have been witnessing the politics of a world transformed by the surge in U.S. oil production – a surge that would not have been possible without hydraulic fracturing. We recently saw its culmination in the nuclear agreement struck with Iran.
The deal is historic, even if it isn’t popular with everyone. In addition to creating the potential for Iran to return to the world, it has accomplished the rare feat of uniting Israel and Saudi Arabia, if only in their opposition to it. But that opposition is telling. A decade ago, a U.S. president could not have pursued an agreement opposed by its two strongest allies in the region. We would not have risked angering Israel, and we could not have afforded to anger the Saudis, on whom we seemed hopelessly dependent because of their oil supply.
Fracking, developed by Houston’s own George Mitchell, changed all that. It has redefined global politics by redefining our relationship with the Middle East.
In 2014, U.S. oil production grew the most in more than 100 years, rising by 1.2 million barrels a day. That abundance enabled us to reduce significantly our foreign oil imports. In January, we imported 32 percent less oil than we did in the same month in 2006, according to the U.S. Energy Information Administration.
As the biggest buyer of oil in the world market, our growing self-reliance has had a profound effect. In January, we bought half as much oil from Saudi Arabia as we did a decade ago, and when President Obama visited later that same month, it marked the first time in many years that a U.S. president met with the Saudis and didn’t ask for more oil.
We now buy almost five times as much crude from Canada as we do from Saudi Arabia, and three times as much as we buy from the Persian Gulf as a region.
Meanwhile, the Iranians have been desperate to cast off economic sanctions that have strangled their economy. Last August, Iranian oil exports dropped to their lowest level on record, and President Hassan Rouhani told the Iranian Parliament that oil revenues were down 30 percent because of weaker oil prices.
What he didn’t say was that those prices were weaker because the biggest buyer in the market was buying a lot less. It was the decline in oil revenue, combined with sanctions that brought Iran to the negotiating table in the first place.
Had it not been for fracking, oil would probably have been driven to $150 a barrel or more by now, given the political unrest in Yemen, Syria, Iraq and other regional hotspots. Gasoline would likely be selling for more than $4 a gallon.
