America just keeps on producing oil, despite low prices and a 1970s-era law preventing most oil exports. U.S. crude oil inventories are the highest they have been in 80 years and with GDP growth stalled at 0.2%, demand seems unlikely to alleviate the oversupply. Even the ever-optimistic International Energy Agency (IEA) admitted that the oil market has grown increasingly “murkier.”
But these spring blues were nowhere to be found in Houston, which recently hosted the annual IHS Energy CERAWeek conference, and in the New York Times, both of which triumphantly declared that America is the new “swing producer” in the global energy market and that the “balance of power” in the energy market has now tipped in favor of the United States. Secretary of Energy Ernest Moniz made headlines when he declares that the United States would soon replace Qatar as the world’s leading liquefied natural gas (LNG) supplier. The CEO of the American Petroleum Institute predicted that the United States is about “to become the new OPEC.”
These predictions are all based on the amount of oil the United States can produce. Not to rain on the parade, but there is more to “unseating OPEC or taking back the balance of power from Saudi Arabia then sheer productive capacity. Yes, the U.S. energy industry, and specifically the shale oil industry, is dynamic, technologically advanced, and innovative. But it is also exceedingly volatile. The U.S. oil market is comprised of many companies, most of which are significantly less secure than Saudi Aramco and other national oil companies across the globe.
No market forces could ever drive American oil companies to mirror the collusion and coordination that give OPEC and Saudi Aramco, as the most powerful partner in OPEC, the power to control the market. American companies must act based on short-term considerations that companies like Saudi Aramco do not face.
These burdens include the following.