- - Tuesday, June 17, 2014

As the Iraqi government collapses in the face of Islamic terrorists, public attention will be mostly on human suffering, as it should be. Women, Iraqi Christians and other non-Sunni religious groups are already being targeted, and the pictures coming in are horrific. The BBC and Fox News are giving “disturbing video” warnings to their Iraq stories, and it looks like it will only get worse.

Further, the terrorists openly announce their intention to create an Islamic religious state from the Mediterranean to the Gulf. The distance from the Iraqi city of Mosul, which is already in extremist hands, to the outskirts of Baghdad, where the front line is now developing, is about the same distance as Baghdad is to the oil fields and export terminals of the northern end of the Gulf. There are thousands of international oil workers and executives in Iraq who could be held for ransom by terrorists.

From a geopolitical standpoint, there is more bad news. Just this spring, Iraq finally returned to previous levels of oil production, approximately 3 million barrels a day. If Iraq’s oil production is suddenly taken off the market, there will be serious worldwide consequences. Over the weekend, oil and gas billionaire T. Boone Pickens predicted that in the event that Iraq is taken over by terrorists, oil prices would rise from about $107 per barrel to perhaps $150 or $200 per barrel. Other oil and gas analysts think that an Iraq catastrophe would affect the oil market for years to come. Bloomberg is more cautious, talking of $116 per barrel, but it concedes this is uncharted territory.

Taking a quick tour of the petro-world is sobering already. Libya in good times exports roughly a million barrels of oil per day. As chaos and tribalism have taken hold, that number has fallen to about 100,000 barrels per day. Nigeria has been plagued by rampant corruption and outright theft of its oil. Now it has to face the Islamic terrorist group Boko Haram, which has so far been unable to attack the oil fields and export terminals, but the future is uncertain.

There are also problems facing the major oil suppliers to the United States. Mexico’s oil giant Pemex, for example, has seen its oil production fall by 25 percent over the past decade. Just this spring, Mexico had to acknowledge what many who follow the oil market have long suspected: It is finding much less new oil than it is producing, perhaps a third as much. This is the equivalent of spending a third more than your annual income. It can’t go on forever. Venezuela, a major source of crude for the United States, is also falling into political chaos. Daily necessities such as bottled water, toilet paper and toothpaste are in short supply.

Other countries also have issues of declining production from older fields. North Sea oil production peaked years ago, and Britain now imports half its energy needs. Indonesia, a longtime OPEC member, is now a net energy importer.

If the world oil market only has to face these threats one at a time, it could probably adjust, although prices at the pump could soar. The problem lies in multiple threats simultaneously; say, Iraq plus Venezuela, or Iraq plus Nigeria.

America does, however, have an ace in the hole: the American shale revolution, which is already sustaining the U.S. economy. If you were to subtract the contribution that shale makes to U.S. gross domestic product and employment, the numbers for both would crash. Certainly, the booming job market in the oil patch is easy enough to see, but even outside the shale areas in places such as Wisconsin and Illinois, shale is holding up employment in heavy industry, for example.

Shale may also help insulate us somewhat from a real world oil crisis. We still import crude oil, but thanks to shale, less and less each month. For example, the Bakken shale field in North Dakota is producing about 1.1 million barrels per day and increasing every month. The Eagle Ford field in Texas hit the 1 million barrels per day figure last October and is on its way to 2 million. The Permian Basin in West Texas has shale, and its numbers are coming up as well, to about another 1 million barrels per day. Looking at Texas as a whole, in March, oil production rose to more than 2 million barrels per day versus 1.6 million in March 2013. Every month sets a new record.

Bottom line: The United States is at a level of energy security we haven’t seen in 25 years, and every month we become more secure.

If we are to avoid a return to the Jimmy Carter era of high unemployment, high interest rates and gasoline lines, we have the hardworking men and women of the shale revolution to thank for it.

William C. Triplett II is the former chief Republican counsel to the Senate Foreign Relations Committee.