As if you hadn’t noticed, gas prices are plummeting. You may have wondered why this is the case. There is really one main reason, and it is shaking things up for OPEC. The US is producing far more oil than it ever has before:
Opec nations are producing about 200,000 bpd more than their agreed quota of 30m bpd, while demand for the group’s oil is expected to fall as low as 29.2m bpd next year, as more North American supply becomes available. To balance supply with demand would suggest that Opec will have to agree on cutting up to 1m bpd from its members’ production and the responsibility for delivering this will fall mainly to Saudi Arabia.
This bodes well for the US on so many fronts. OPEC, the largely Middle Eastern oil cabal, has had an undue influence on international policy because of US dependence on oil. But OPEC will have to look eastward for oil consumers if it wants to continue its current production of oil. Not only will this mean lower overall prices for gas, it will also mean that the countries in OPEC will be at loggerheads more and more in the coming years. This could actually mean a dissolution of OPEC or a severe weakening of its solidarity. Such competition is also good for the US, as it will mean a divided front among the Middle East’s oil-rich countries.
As the US gets closer and closer to oil independence, we have far more bargaining chips in our diplomatic struggle with the Middle East. Interestingly, it may be the case that oil production and the free market on oil have a greater effect on politics in the Middle East than “boots on the ground” ever did.
And isn’t that what non-interventionists have been saying for years, though their recommendations fell on largely deaf ears? We have the opportunity in the next few years to remove oil as a factor in political leverage. The freedom this gives us internationally is incontestably positive. And if the Keystone pipeline enters into this picture as well, the US could stand to have even cheaper gas and even more political independence from OPEC in the coming years. All I can say is, it’s about time.