Farewell to OPEC
Maybe the fly on the wall knows, because nothing was leaked to the New York Times or Washington Post, but one of the topics that may have come up in meetings between American and Saudi officials during President Trump’s historic visit is the energy revolution unleashed by President Trump that is sure to make the Organization of Petroleum Exporting Countries an energy relic.
Through regulation repeal and executive orders and the changing of the guard at the Environmental Protection Energy, Trump has made fossil fuels great again with expanded shale oil and natural gas production for both domestic consumption and export leading the way. And thanks to the completion of the Keystone XL and Dakota Access pipelines, North American energy independence is soon to become reality.
As Investor’s Business Daily editorialized in 2013, the Saudis, among other OPEC members, have been freaking out about fracking, warning that it spelled doom for the Arab oil cartel:
Indicative of the panic rippling through the Organization of Petroleum Exporting Countries over the U.S.-led fracking boom, billionaire Saudi Prince Alwaleed bin Talal says his Gulf Arab kingdom needs to reduce its reliance on crude oil and diversify its revenues, lest the era of gold-plated toilets come to an end.
In an open letter to his country's oil minister Ali al-Naimi and other government heads, published on Sunday via his Twitter account, Prince Alwaleed said demand for oil from OPEC member states was "in continuous decline" as a result of the technology that has unleashed vast deposits of oil and natural gas worldwide.
So concerned were OPEC ministers that they financed a Hollywood flick, Promised Land starring Matt Damon, which incorporated every falsehood about the safety of fracking and was intended to fuel its death by regulation:
The anti-fracking film is based on a not-true story about well contamination in a small Pennsylvania town with a healthy dose of junk science.
As documentary filmmaker Phelim McAleer, who is working on his own documentary, "FrackNation", has pointed out, the inspiration for the film was a spate of news reports about alleged ground water contamination from fracking wells in Dimock, Pa. "Promised Land" is set in rural Pennsylvania…
The only problem, notes McAleer, is the claims were debunked by both the Pennsylvania Department of Environmental Protection and the Environmental Protection Agency, both of which found no evidence of contamination. But why spoil a good story with the facts? …
It should not surprise that major funding for the film, according to the Heritage Foundation's Lachlan Markey, comes from Image Media Abu Dhabi, a subsidiary of Abu Dhabi Media.
"A spokesperson with DDA Public Relations, which runs PR for Participant Media, the company that developed the film fund backing "Promised Land", confirmed that AD Media is a financier. The company is wholly owned by the government of the UAE," Mackey writes.
The film depends on junk science for its story line. The mixture used to fracture shale is in fact a benign blend of 90% water, 9.5% sand and 0.5% chemicals such as the sodium chloride of table salt and the citric acid of the orange juice you had for breakfast.
Shale formations in which fracking is employed are thousands of feet deep. Drinking water aquifers are generally only 100 feet deep. There is a lot of solid rock between them.
OPEC’s greatest fears are being realized as fears about fracking vanish under the glare of reality. As the Energy Information Administration reports, OPEC is being hit hard as American shale production helps dry up OPEC’s coffers:
Members of the Organization of the Petroleum Exporting Countries (OPEC) earned about $433 billion in net oil export revenues in 2016, the lowest since 2004. In real dollar terms, the 2016 revenue represents a 15% decline from the $509 billion earned in 2015, mainly because of the fall in average annual crude oil prices and, to a lesser extent, because of decreases in OPEC net oil exports.
Fracking is putting downward pressure on oil prices, reducing the revenues of both OPEC and Russia. Trump is clearly not colluding with Russia on oil prices, a nation which Sen. John McCain once described as “a gas station masquerading as a country.” As the American Interest notes:
That 15 percent year-on-year decline is a dramatic example of the fiscal pain these petrostate regimes are enduring as a result of the collapse in crude prices. Those low prices come to us courtesy of American shale producers, whose output contributed to a global glut that brought prices from their $100+ per barrel levels down to the $50 range they occupy today.
Those lost export revenues are why OPEC, along with a group of 11 other petrostate producers (including Russia), have agreed at last to reduce their collective output in an attempt to rebalance the market.
American shale is now the elephant in the room. The Saudis may have concluded a massive arms deal with the United States to counter the Iranian threat, but thanks to U.S. energy resurgence they will have to dig deeper to pay for it.
Daniel John Sobieski is a fre lance writer whose pieces have appeared in Investor’s Business Daily, Human Events, Reason Magazine and the Chicago Sun-Times among other publications.