The Politics Of Falling Oil

Like a toy that fascinates beyond any reward, the oil producers in North Dakota have a new bauble. From the earlier days of only a few years back they have already advanced the recovery technology to substantial production increases from existing sites. Some heavily drilled areas such as the Fort Berthold Reservation, produce more than a third of  the overall million barrel per day yield from the enormous Bakken field.  The oil shale resources that have been developed by the controversial practice of hydraulic fracturing have changed the face of the oil industry.  Oil producer nations are now a global force in full retreat, and no longer able to dictate prices by advancing a convenient theory of impending scarcity, or scaling back production.

US Production Has Changed the Global Market

The world is awash in oil and oil reserves, while the Earth may not continuously produce fossil fuels, the ingenuity of mankind has made it appear to be an onion rather than a vessel. Technology turns new leaves and the half full glass is once again overflowing. Nations and businesses that invested in $95 per barrel oil only six months ago, now realize the price may fall below $50. In the United States, automobile owners see things they had forgotten existed, such as the number “$1” on front of the price per gallon at the pump.  I imagine few of them say thank you Mr. Obama, but the policies of his Administration – low-interest rates, steady job growth, and liberal leave to advance an environmentally risky technology, have paid enormous dividends for consumers around the globe. The U.S has set records for annual crude production.

Russia, Iran, and Venezuela Suffer

 Russia planned of $95 per barrel oil and free access to western bank financing. After the Obama sanctions and the impact of Obama banking and growth policies in the US, oil has fallen to near $50, the Ruble has collapsed, and the Russian economy is in a deep recession. Buoyed by controlled news and media, the Russian government remains popular and has slowed but not stopped the Invasion in Ukraine. The people do not know the sacrifices they make are not for the nation but likely to benefit a luxury class of millionaires. Venezuela and Iran have also fallen economically in lockstep with the fall of oil. Venezuela experiences critical domestic shortages, inflation, and negative growth. Iran, already faced with sanctions, now must wrestle with threats from ISIS as well as severe shortfall in revenues from oil. With limited access to international sources of financing, the government faces tight budgets and monetary constraints.

The overall impact is that the U.S. economy has gained steam, and with a short burst of discretionary consumer spending, the recovery has shown remarkable depth. There may yet be an unwanted corollary to repair the damage to the environment generally and to the water supply in particular as a result of wide spread recovery of shale oil deposits.