U.S. Hydraulic Fracturing Disrupts Global Oil and Gas Markets
Protest against the dangers of the use of Fracking
have taken place across the U.S. This one in
Maryland in 2017. (Food & Water Watch)
The global oil market price began a steady
decline when U.S. oil production rapidly increased
due to the extensive use of hydraulic fracturing
circa 2011. From 2007 to 2016, annual U.S. oil
production increased 75 percent and beyond to 15
million bbl per day for 2019, while natural gas
production increased 39 percent, due to the
advancements in horizontal drilling and fracking
technology. This caused major oil exporters to the
U.S., in particular Saudi Arabia, to seek other
markets, which led to increasing global
competition for those markets and a price war. It
appears in the present situation that Russia and
Saudi Arabia are seeking an agreement to reduce
global oil supply but the U.S. or at least its
major energy cartels do not want to comply.
In return for any cut of Russian oil production,
Russia probably also wants the U.S. to drop its
opposition to Russia's Nord Stream II and
Turkstream pipelines to Europe and possibly have
U.S. troops leave Syria and return the U.S.
occupied oilfields to the Syrian government.
Deliberately reducing the price of a commodity by
flooding markets with a certain commodity to drive
a competitor out of business is a longstanding
tactic for imperialist cartels. The price of
production of fracked oil is higher than
conventional drilling. The current global market
price below $30 a barrel is driving U.S.
unconventional oil production (hydraulic
fracturing) into crisis. This is what both Russia
and Saudi Arabia want in the short term but Saudi
Arabia cannot appear publicly to support such a
cause because of its dependent status vis-à-vis
U.S. imperialism.
Saudi Arabia is in the toughest bind because of
the Yemen war, the temporary loss of tourism and
pilgrimages to Mecca and its anti-Iran posture. It
has succeeded in finding other oil markets in east
Asia to partly offset the loss of the U.S. energy
market from the growth of U.S. domestic supply but
still the world is awash in oil in particular now
with the COVID-19 crisis. Once the pandemic is
defeated and the demand for energy increases and
with less U.S. supply, with the bankruptcy crisis
having destroyed many small and medium sized U.S.
producers of unconventional oil, the oil price
will rise. At least that is the hope of Russia and
Saudi Arabia and possibly even the big U.S. energy
cartels such as ExxonMobil and Chevron.
This article was published in
Volume 50 Number 12 -
Article Link:
U.S. Hydraulic Fracturing Disrupts Global Oil and Gas Markets
Website: www.cpcml.ca
Email: editor@cpcml.ca
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