I had an argument recently with a woman in Moscow over American energy production. She simply did not believe that the United States has become the largest energy producer in the world — which marks a real shock to the ordinary Russian’s self-image.
Muscovites have lived high on the hog for decades off the revenue from the hydrocarbon industry. That lifestyle ended for most in 2014 with the collapse of the price of crude on international markets.
But Russians always thought the good times would come back when the price of oil eventually rebounded. That hope is still alive in the Russian capital as world crude oil prices have broken the $70 range.
The Russian agreement with OPEC to jointly reduce production and therefore decrease supply in the world oil market has worked to a large extent. However, the overriding fear of the new cartel is that American shale producers will simply pick up market share as the price moves higher and U.S. fields become more and more profitable.
It looks like these fears have been realized. The International Energy Agency recently reported that 60 percent of the reduced production from OPEC was being replaced by American producers.
The IEA also forecast that the U.S. would become the largest energy producer on the planet this year. “This year promises to be a record-setting one for the U.S.,” agency analysts wrote. “Relentless growth should see the U.S. hit historic highs.”
The IEA also projects that U.S. production could increase 25 percent by 2025, reaching 30 million barrels of oil and gas a day.
The Trump energy train has left the station. There is no stopping it.
This impact of President Trump’s policies on the world energy market — and on the geopolitical balance of power — will be profound.
First of all, America will soon be energy-independent, the holy grail that the U.S. has been fruitlessly searching for since Richard Nixon reduced the speed limit to 55 miles per hour in the 1970s.
No longer will America be dependent on what passes through the Strait of Hormuz, jealously guarded by Iranian fast attack boats. No longer will Washington feel the need to protect energy supplies in Saudi Arabia or in the Gulf kingdoms. Of course, terrorist safe havens will always be a concern, but American energy independence takes the leverage away from OPEC and the theocracies in the region.
Second, Europe will no longer be dependent on Russian gas, transforming at a stroke the continent’s security paradigm. Although the Kremlin is fighting this outcome with additional pipeline construction and other initiatives, it seems the shift is preordained. Poland, Ukraine and other countries in the region would like nothing better than to buy liquid natural gas from the U.S. — even at a slightly higher price — than be dependent on the Kremlin for an energy source that could disappear with the flick of a switch in a conflict. As investment and development continue to boom in America because of Mr. Trump’s policies, shale oil will become more and more profitable as prices drops. As Mr. Trump told the Republican congressional retreat in West Virginia on Thursday, “We’ve only just gotten started.”
And don’t forget, this administration has seven more years.
An overlooked result of the U.S. energy revolution is the resulting tax revenue that will fill the government coffers in Washington and the states. Paying down the debt, rebuilding the military, rebuilding our infrastructure all will be made much easier owing to record tax receipts over the next decade.
America’s nuclear deterrent will be rebuilt. Our confidence will rebound. Our Obama malaise will fade.
Economic power begets military power: The U.S. will have the money it needs to develop missile defenses, to restart the space program, to rebuild the armed forces and to reassert leadership in the world.
The Russian, Chinese and Iranian leadership knows this. It seems the average person on the Tverskaya Street in Moscow hasn’t quite figured it out.
⦁ L. Todd Wood is a former special operations helicopter pilot and Wall Street debt trader, and has contributed to Fox Business, The Moscow Times, National Review, the New York Post and many other publications. He can be reached through his website, LToddWood.com.