OPINION:
I recently wrote a column arguing that increased American production of oil and gas, which has led to a decrease in our reliance on oil from the Middle East, was part of the reason we were able to attack Iran with impunity a few weeks ago. Unlike in 1973 and 1979, the Arabs (or, in this case, the Persians) have lost the ability to impose a meaningful physical or economic embargo of oil.
A friend of mine who knows quite a bit about the oil business believes that way of thinking is wrong. He thinks the additional production from North America hasn’t really altered global oil markets all that much, that the real price setters in oil markets nowadays are the Russians and the Mexicans, and that Americans care more about the price than the origin of their oil anyhow.
Maybe all that is true, but it seems to me that my friend misses a couple of things that are foundational to the psychology of energy and energy markets. Way back in 2010, the world consumed a shade less than 90 million barrels of oil a day. In 2024, that number was around 100 million barrels a day. In that time frame, North American production surged. Canada increased its production of crude from 3.4 million barrels a day to 6 million barrels a day. The United States went from producing 9.7 million barrels a day to 22.7 million barrels a day.
It feels like simple economic theory would predict that if demand goes up by 10 million barrels and supply increases by 15.5 million barrels, prices should go down. Sure enough, they pretty much have. Oil opened this morning at around $65 per barrel. That compares with an average price in July 2010 of about $112 per barrel (adjusted for inflation).
So, the world markets have already been altered and affected by the surge in production from the United States. Last year, we were — for the sixth straight year — the world’s largest oil producer, accounting for a fifth of global production. Our oil and condensate output is about equal to the combined output of Saudi Arabia and Russia.
This is not to say that the United States is disconnected from world markets. An attack on Saudi Arabia or on critical infrastructure in the Middle East would certainly affect world markets, but the reality is that such an attack, and the attendant economic damage, would hurt other producers much more than it would hurt the United States.
What about consumers caring more about price than they do about whether the energy they use is imported? Well, we have about 50 years of survey data that tells us Americans have a decided preference with respect to the origin of their energy; they prefer American energy and American energy independence. It is no accident that every president since Richard Nixon has preached energy independence.
That said, Americans know that the oil market is global in nature and is consequently subject to occasional turbulence. They also know that it is better to produce more oil and gas here in the States — or, if we need to import oil, to import it from our neighbors in Canada rather than hostile nations in other parts of the world.
The lesson of the 1970s — do your best to avoid reliance on those who do not like you, especially with respect to energy — has never been forgotten by the American voters.
We are in the midst of the greatest energy boom in the history of the United States. The surge in oil and natural gas production in America in the past 20 years has been spectacular and has made the country wealthier and more resilient with respect to global energy shocks. It has set the stage for us to command the economic heights of the next century.
Our collective future is limited only by the amount of affordable energy we can bring to bear, our technological skill and our imagination.
• Michael McKenna is a contributing editor at The Washington Times.
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