This article originally appeared in TomDispatch.
Three and a half years ago, the International Energy Agency (IEA) triggered headlines around the world by predicting that the United States would overtake Saudi Arabia to become the world's leading oil producer by 2020 and, together with Canada, would become a net exporter of oil around 2030. Overnight, a new strain of American energy triumphalism appeared and experts began speaking of "Saudi America," a reinvigorated U.S.A. animated by copious streams of oil and natural gas, much of it obtained through the then-pioneering technique of hydro-fracking. "This is a real energy revolution," the Wall Street Journal crowed in an editorial heralding the IEA pronouncement.
The most immediate effect of this "revolution," its boosters proclaimed, would be to banish any likelihood of a "peak" in world oil production and subsequent petroleum scarcity. The peak oil theorists, who flourished in the early years of the twenty-first century, warned that global output was likely to reach its maximum attainable level in the near future, possibly as early as 2012, and then commence an irreversible decline as the major reserves of energy were tapped dry. The proponents of this outlook did not, however, foresee the coming of hydro-fracking and the exploitation of previously inaccessible reserves of oil and natural gas in underground shale formations.
Understandably enough, the stunning increase in North American oil production in the past few years simply wasn't on their radar. According to the Energy Information Administration (EIA) of the Department of Energy, U.S. crude output rose from 5.5 million barrels per day in 2010 to 9.2 million barrels as 2016 began, an increase of 3.7 million barrels per day in what can only be considered the relative blink of an eye. Similarly unexpected was the success of Canadian producers in extracting oil (in the form of bitumen, a semi-solid petroleum substance) from the tar sands of Alberta. Today, the notion that oil is becoming scarce has all but vanished, and so have the benefits of a new era of petroleum plenty being touted, until recently, by energy analysts and oil company executives.
"The picture in terms of resources in the ground is a good one," Bob Dudley, the chief executive officer of oil giant BP, typically exclaimed in January 2014. "It's very different [from] past concerns about supply peaking. The theory of peak oil seems to have, well, peaked."
The Arrival of a New Energy Triumphalism
With the advent of North American energy abundance in 2012, petroleum enthusiasts began to promote the idea of a "new American industrial renaissance" based on accelerated shale oil and gas production and the development of related petrochemical enterprises. Combine such a vision with diminished fears about reliance on imported oil, especially from the Middle East, and the United States suddenly had -- so the enthusiasts of the moment asserted -- a host of geopolitical advantages and fresh life as the planet's sole superpower.
"The outline of a new world oil map is emerging, and it is centered not on the Middle East but on the Western Hemisphere," oil industry adviser Daniel Yergin proclaimed in the Washington Post. "The new energy axis runs from Alberta, Canada, down through [the shale fields of] North Dakota and South Texas... to huge offshore oil deposits found near Brazil." All of this, he asserted, "points to a major geopolitical shift," leaving the United States advantageously positioned in relation to any of its international rivals.
If the blindness of so much of this is beginning to sound a little familiar, the reason is simple enough. Just as the peak oil theorists failed to foresee crucial technological breakthroughs in the energy world and how they would affect fossil fuel production, the industry and its boosters failed to anticipate the impact of a gusher of additional oil and gas on energy prices. And just as the introduction of fracking made peak oil theory irrelevant, so oil and gas abundance -- and the accompanying plunge of prices to rock-bottom levels -- shattered the prospects for a U.S. industrial renaissance based on accelerated energy production.
As recently as June 2014, Brent crude, the international benchmark blend, was selling at $114 per barrel. As 2015 began, it had plunged to $55 per barrel. By 2016, it was at $36 and still heading down. The fallout from this precipitous descent has been nothing short of disastrous for the global oil industry: many smaller companies have already filed for bankruptcy; larger firms have watched their profits plummet; whole countries like Venezuela, deeply dependent on oil sales, seem to be heading for receivership; and an estimated 250,000 oil workers have lost their jobs globally (50,000 in Texas alone).
In addition, some major oil-producing areas are being shut down or ruled out as likely future prospects for exploration and exploitation. The British section of the North Sea, for example, is projected to lose as many as 150 of its approximately 300 oil and gas drilling platforms over the next decade, including those in the Brent field, the once-prolific reservoir that gave its name to the benchmark blend. Meanwhile, virtually all plans for drilling in the increasingly ice-free waters of the Arctic have been put on hold.
Many reasons have been given for the plunge in oil prices and various "conspiracy theories" have arisen to explain the seemingly inexplicable. In the past, when prices fell, the Saudis and their allies in the Organization of the Petroleum Exporting Countries (OPEC) would curtail production to push them higher. This time, they actually increased output, leading some analysts to suggest that Riyadh was trying to punish oil producers Iran and Russia for supporting the Assad regime in Syria. New York Times columnist Thomas Friedman, for instance, claimed that the Saudis were trying to "bankrupt" those countries "by bringing down the price of oil to levels below what both Moscow and Tehran need to finance their budgets." Variations on this theme have been advanced by other pundits.
