A recipe for geopolitical madness – Combine surplus US oil, anti-oil activism, rising consumption, a less-relevant Middle East, and a dash of Trump

Once upon a time, like fifteen years ago, there was a weird stability in the petroleum world. It was a highly customized stability, with miles of duct tape and haywire holding it together, but it worked.

In a nutshell, the industrialized world (the US in particular) was a voracious oil-consuming machine, which turned largely to OPEC to get what it needed. OPEC didn’t provide the majority of the world’s supply, but a lot of it, and unlike commercial institutions subject to anti-trust laws OPEC could raise or lower production levels to suit their whims and their need for another squadron of Ferraris.

Because of OPEC’s ability to manipulate the price of industry’s lifeblood, the western world showed a nearly daft reverence for the group, particularly Saudi Arabia. Saudi Arabia played that card well, yanking oil markets to and fro on seemingly whimsical impulses. A fender-bender between a Saudi diplomat and a garbage truck was enough to wound egos and send the price of oil up $5 a barrel.

A spike in oil prices was like a tax on everything, and governments prefer to retain that right solely for themselves. So OPEC appeasement was largely the order of the day, and appeasement was not insignificant. Consider that most of the 9/11 hijackers, in an attack that killed over 3,000 Americans on American soil, hailed from Saudi Arabia, and in retaliation for this huge and brutal act of terrorism the US did – nothing. Not quite true, they invaded two other countries. But SA got a free pass.

No more though. And the repercussions of a new world order are shaking the world like a 55.0 Richter scale earthquake.

Thanks to the US shale boom, the US is now an exporter of both oil and natural gas. In short, this means a spectacular new bravado on the world stage with respect to oil supplies. While the US was hardly short of bravado before, the rules of engagement changed significantly once the US decided it no longer needed to kiss foreign asses to ensure their own petroleum supply.

It’s not just the US shale boom that has ensured supply either. Looking north of the 49^th parallel, the US sees the world’s largest available oil deposit – Alberta’s oil sands – landlocked, and in goofily friendly hands. With limited access to foreign markets, Canada’s oil and natural gas are forced into the middle of the continent, and the US can (and will) permit pipelines at their leisure to ensure that those 170 billion barrels and countless thousand cubic feet of gas are there when they need them (that is, when the shale boom subsides).

The US has for decades been the protector of the Middle East, because the Middle East controlled so much of the world’s oil supplies. Well, protector might not be the best descriptor; it’s probably more accurate to call the US an enforcer of stability in the region. Any kind of sabre-rattling, or minor skirmishes, or name-calling was fine, as long as oil exports from the region weren’t jeopardized. If they were, here comes the warships.

But all that is ending. The US no longer feels the need to treat the Middle East the same, see: the assassination of Iran’s number two, and this feeling is (to put it mildly) amplified under Trump. While that’s happening, other countries like China and India, both of whom need ever-more quantities of all types of energy but in particular petroleum, are elbowing their way into the oil marketplace, determined to secure supplies required to keep nearly 3 billion people from starving, freezing, rioting, or otherwise turning into very angry citizens.

At the same time, the global anti-fossil fuels movement, which is actually only a few thousand very, very vocal people, is forcing petroleum development from countries that have high operating standards and are open to scrutiny to murkier places where development dollars trump other concerns and/or they just don’t give a shit, like Russia.

These are major, major shifts in the way the world operates. The repercussions are completely unknown, because we’ve never been here before. We’ve never seen this sort of realignment, in a world that desperately needs oil to keep economies running.

If we’re lucky, a few inter-Arab missiles like we saw this past week will be the extent of it. But it is now a global act, with no rule book. It might get very interesting.

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