ferguson on the frontline
The far-reaching effects of U.S.
oil exports around the world
By Bob Ferguson
have written a number of times in this column about fracking and how it is making a
dramatic impact—not only on energy supply but on wide-reaching areas of the global
economy and world politics. In my column last
December (“Fracking, Take 2”), for example, I
listed my top 10 questions about fracking, and several of those related to fracking changing the dynamics of the world economy, geopolitics and the U.S.’
role in numerous world regions and conflicts.
The U.S. has long been the world’s largest energy
consumer, but with fracking, we are now also the
world’s largest energy producer. We were able to
take this position through the surge in production
from fracking while the large oil-producing nations
reduced their output due to political instability (e.g.,
Russia’s energy production is down considerably)
or economic reasons (reducing output while waiting
for a better world price). Our energy consumption is
also down from what it was a few years ago because
of advances in fuel and energy efficiency
and a slower economic growth rate.
This reduced demand in an environment of high levels of production has created a general
surplus of oil and gas and an
outright glut of some forms
of oil and gas (particularly
the light crudes and condensates associated with
fracking). Because of these
surpluses, the U.S. will, for the
first time in decades, begin to
export oil and gas.
This will have significant impacts on the world oil
market, not the least of which will be lower prices.
The U.S. switch to imports from West Africa
became a “gold rush” of sorts in Nigeria and Angola,
and those economies have become heavily reliant
on the U.S. as the No. 1 destination for their oil. With
the oil surpluses from fracking, however, exports
from West Africa have been dropping dramatically.
According to data from the U.S. Energy Information
Administration, imports of Nigerian and Angolan oil
have fallen to one-tenth of what they were just seven
years ago, and it seems as if this amount quickly
is heading to zero. This summer, cargoes of West
African crude oil went unsold. These countries are
slowly finding other markets for their oil in Europe
and Asia, but demand from those regions is unlikely
to make up more than a fraction of the demand they
once saw from the U.S., and they likely will see a
much lower price for their oil as well.
This is a difficult problem for those nations. In
Nigeria, for example, crude oil accounts for more
than 95% of its export revenue and more than
70% of its government’s revenue. This revenue is
not only essential for the stability of the government and the country’s continued development of
energy and transportation infrastructure, but it provides the foreign currency needed for repayment
of loans and the stability of local currency. At the
time of the writing of this article, Nigeria also was
battling a public health crisis with the spread of the
Ebola virus. Presumably, the government’s ability to
address this and future crises will be dramatically
affected by the lack of oil revenue.
Will this lead to a new region of instability in the
world? Will the boom these countries have seen
in the past few decades turn into a tragic bust?
President Obama hosted a three-day summit on
business in Africa this summer to highlight future
opportunities for trade with Africa given continued development of its manufacturing, energy
and transportation infrastructures. Could progress
be stalled by a dramatic change in the
region’s economy due to oil?
Shale oil is
changing the
face of the world
economy and
world politics
along with it.
A New Beginning
In the decades since the oil embargoes of
the 1960s and 1970s, the U.S. implemented policies
and regulations to restrict exports of oil and gas.
This was a strategic effort to conserve the oil produced in the U.S. by prohibiting exports to countries
other than Canada. The attacks of 9/11 strengthened these initiatives, and further measures were
added to diversify our supplies of oil. With the
ongoing political instability in the Middle East, the
U.S. systematically moved away from the Middle
Eastern supply and toward other more reliable supplies. One of the regions that greatly benefited from
this switch was the oil-producing region of West
Africa, particularly Nigeria and Angola.
In June of this year, the U.S. Depart­
ment of
Commerce licensed two companies to begin exporting crude oil, with the first shipments scheduled for
this past August. With the surpluses that exist in the
U.S., domestic producers are eager to export and get
higher prices from foreign buyers. Additional companies also are expected to apply for export licenses.
12
October 2014 | Water & Wastes Digest
Global Reach
OK, so why am I writing about West African oil
exports in this column?
Because the enormity and
wide-reaching impact of
fracking and the shale oil
boom in the U.S. never fails
to amaze me. Shale oil is
changing the face of the world
economy and world politics
along with it. And this is just from
shale production in the U.S.; shale
exploration and production in the other, larger
fields in the world—in countries such as China,
Russia, Brazil and others—is only beginning.
The controversial environmental impact of fracking will continue to be studied and debated. But with
the potential of fracking to change the face of the
world economy and its political landscape, with fortunes to be made and vast political power gained or
lost, there is far too much at stake to think that its
progress will be slowed or halted. Much in the world
will change in ways that will be difficult to predict.
But shale oil’s “butterfly wings” will continue to have
their impact.
Bob Ferguson is a consultant in water and wastewater
product safety, certification, analysis and treatment, and is a
frequent author on water and environmental topics. Ferguson
can be reached at [email protected], or
follow him on Twitter @Ferguson9806.
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