https://www.wsj.com/articles/how-american-fracking-changes-the-world-1543276935
The most important news in world politics this month isn’t about diplomacy. Bigger than Brexit, more consequential than presidential tweetstorms, the American shale revolution is rapidly reshaping the global balance of power as energy prices plummet.
Until recently, observers expected American energy production to reach a plateau. A lack of pipeline capacity was expected to constrain output in the Permian Basin through 2020. Instead, shippers found ways to use existing pipelines more efficiently, and new pipelines were constructed faster than expected. U.S. crude-oil production is expected to average 12.1 million barrels a day in 2019, 28% higher than in 2017. Surging production has roiled world energy markets.
The biggest loser is Iran. Shale has been pummeling Tehran for some time. The economic benefits Iran hoped to gain from President Obama’s nuclear deal were largely offset by the sharp 2016 fall in the price of oil. Now the pesky Permian is blighting Iranian hopes again. Rising American output made it easier for the U.S. to slap tough sanctions on Iran without risking a sharp rise in world energy prices. Low prices also reduce Iran’s income from the oil it still manages to sell.
The next biggest loser is Russia. Oil is a key revenue source for the Kremlin. But the shale boom doesn’t only pick Vladimir Putin’s pocket; it also attacks his foreign-policy strategy.
Russia wants to control the world oil price and use that power to boost its diplomatic weight. Mr. Putin has two ways to influence the price of oil. The first is to increase geopolitical tensions. If threatening Ukraine or bombing Syria spooks traders and jacks up energy prices, Russia has a better hand in negotiations with Europe and the U.S.
Mr. Putin’s second option is to cooperate with the Organization of the Petroleum Exporting Countries on price fixing. Building a closer relationship with Saudi Arabia over their common interest in inflated oil prices might loosen the kingdom’s U.S. ties and generate lucrative commercial and arms deals for the Kremlin.
