The Oil Reversion

Ten years ago the US was a net importer of oil, importing about 70% of its needs, mostly from the Middle East.  Today the US is a net exporter of oil and natural gas, and imports only 30% of its needs.  The reasons for this are, the cost of shale oil extraction in North Dakota has gone down by ca. 50% and the use of fracking has provided huge amounts of oil and natural gas.  The US is poised to become the second largest producer of oil in the world after Russia, and is about to out-produce Saudi Arabia.  What a reversal of fortunes.

So I think we can safely say that the “oil weapon” that was used by the Arabs in the 1970’s to blackmail the West, will never happen again.  The US exports natural gas to Canada and Mexico and by tanker as liquefied natural gas (LNG) to Europe.  Pres. Trump wants to double those exports in order to wean Europe away from dependence on Russia’s oil/gas supplies.  Also, the fact that the US is a net exporter of oil/gas means that the price of a gallon of oil has gone down from its historic highs,and will probably never rise again.  At present there ise more than enough gas/oil in the world to satisfy current needs.  But, everyone is aware that these needs and demands for energy in the form of electricity is always increasing, hence the need to develop efficient clean energy production.

There are six major forms of clean energy being developed and used: 1. Biomass, especially burning trash and agricultural byproducts; 2. Solar, several types including solar batteries (direct energy) and solar mirror farms (indirect); 3. Waves, both coastal waves and deep-sea water movements; 4. Wind, mainly in the form of huge propeller farms; 5. Hydro; from dams and waterfalls; 6. Thermal, mainly from underground heating.  Each of these forms have their niche, such as underground thermal heating is used in Iceland to supply most of their energy needs.  In Holland, there is a lot of offshore wind energy being exploited.  In desert areas, solar is being rapidly expanded, in Spain, Israel and California.  All of these methods are being developed, thus gradually lowering the dependence on oil.  And then there is of course nuclear energy, and in the long-term fusion energy.

All of these alternative energy sources, as well as the current glut of oil on the world’s market, have reduced the financial power of such countries as Saudi Arabia and Iran. And if that is their only money-earning resource, then they have in the long-term to change and plan for a different form of economy.  In Saudia that is one reason why the King-in-waiting Mohammed bin Salman, is already starting to transform and liberalize their society.  They will need to have women in their work force, which means allowing them to drive and to travel unimpeded by the old ways of needing to obtain written permission from their male relatives (and you thought they were making these changes because they have become humanitarians).  The increased involvement of women in society and their increased economic power will hopefully make Islamic societies more humane in the long run.

The US now has the largest amount of oil as a strategic reserve than at any time in the past, and its oil/gas production is increasing all the time.  The price of oil is bound to go down, thus hitting the Middle East oil producers financially and reducing their political bargaining power.  The world is changing, and we should not be afraid to grasp the advantage.