Business
4:55 am
Thu November 14, 2013

Fracking Boom Gives U.S. Geopolitical Leverage

Originally published on Thu November 14, 2013 6:19 am

Transcript

RENEE MONTAGNE, HOST:

American oil production has grown so much that it may affect American global strategic thinking. The technology known as fracking has allowed a flood of previously inaccessible oil.

STEVE INSKEEP, HOST:

It has also prompted a flood of questions about polluting ground water and other environmental effects. But fracking has given the global oil market a fresh source of supplies.

MONTAGNE: That allows the U.S. and other nations the freedom to take steps, like choking off the supply of oil from Iran. U.S.-led sanctions have intensified against Iran, which hasn't sold oil directly to the U.S. for years, but has sold a lot of oil to India and China.

INSKEEP: That pressure has prompted Iran to engage in nuclear negotiations this fall. Those watching the story includes The Wall Street Journal's Gregory Zuckerman, author of a new book called "The Frackers."

GREGORY ZUCKERMAN: Oil prices are really set by global buyers and global sellers. So the fact that you've got Iran, which is producing about half of what it was producing just a few years ago in crude, but we're taking up the slack that really has helped us keep a lid on oil prices internationally.

INSKEEP: Work me through some numbers here. How many barrels of oil per day is the world using right now?

ZUCKERMAN: Right now it's about 89 million barrels per day. And we, the United States, are responsible for production of about nine percent of that - about eight million barrels. And that's up since 2005, when we were at about five million barrels. We've added about four percent to the global supply of crude.

INSKEEP: That's a big deal.

ZUCKERMAN: It is. And at the margin, it's a really big deal. It's not to say people kind of say to me well, Greg, you wrote this book about the energy revolution, why aren't I paying a lot less at the pump? And I'm not sure we're going to be paying a lot less at the pump, but it's relative to what we would have to pay. Had this revolution not taken place we wouldn't have been able to do the kind of sanctions and boycotts of Iran that we've orchestrated and we would be paying a lot more. And so it has had an effect for consumers.

INSKEEP: Are you willing to argue that if the United States had not been able to boost its production of oil in the last several years that the global sanctions regime against Iran would be a lot weaker - would have fallen apart? There would be other countries that would say there's just not enough oil in the world, we need Iran's oil far more badly than you realize, America?

ZUCKERMAN: Yeah. I do think that the temptation to not participate in the sanctions of Iran would've been much greater had it not been for this fracking and energy revolution in the United States. It's not to say that we wouldn't have had partners and allies in the effort, but not everyone would've participated like they are today.

INSKEEP: You know, it's nice to be able to think that the United States would be less dependent on a frequently unstable region like the Middle East. But is that something of an illusion? Because it is a global market and if supplies from Saudi Arabia say, are disrupted or supplies from Iraq are disrupted, even if that oil wasn't going directly to the United States, it's going to affect oil prices in the United States.

ZUCKERMAN: That's exactly right. As long as we care about oil, we're going to care about the Middle East. But at the margin, it's going to give us a lot more flexibility. I really think that we are going to be less involved in the Middle East. And I really think countries like China are going to become more important and more involved in the Middle East. And frankly, the kind of military experts I talked to are still trying to figure out if that's a good thing or a bad thing. But either way we're going to be much less dependent on the Middle East and much less involved in the Middle East and energy is going to play a much bigger role.

Last year, Hillary Clinton, when she was Secretary of State, she created a dedicated energy bureau within the State Department, and she said energy is going to play a bigger role in future diplomacy, and I think that's really going to be the case.

INSKEEP: So let me just make sure I understand where the numbers are headed. You're saying that a few years ago the United States was producing five million barrels of oil per day - which is a lot but not nearly as much as we consume, it's now gone up very quickly to eight million barrels of oil per day. What's the upper end? How high can it go?

ZUCKERMAN: Some people say we could hit 11. There is a lot of discrepancy and disagreement about the shale wells that are key to it all because their production falls out very quickly. Some skeptics say nah, we are never going to kind of get energy independence. I kind of agree. I think energy independence is a little overstated and we can really hope for that. But I think energy's secure over the next few years, meaning we depend on some of our allies. Mexico and Canada are much less reliant on places like the Middle East. It's all very healthy. I don't know, frankly, how long it's going to last, maybe a last five years or 10 years, but for that period it'll be very healthy for us.

INSKEEP: Gregory Zuckerman of The Wall Street Journal. His book is called "The Frackers." Thanks very much.

ZUCKERMAN: Sure. Great to be here. Transcript provided by NPR, Copyright NPR.