The downside of oil independence | Jeff Rubin.
What a difference a couple decades can make. OPEC’s decision to maintain production has rocked the TSX, sending energy companies as well as governments scrambling to figure out what to do in a new world order where oil prices might continue to slide. Rewind to the energy crisis in the 1970s and a decision by OPEC to keep pumping oil would have been cheered by investors not to mention motorists and the rest of the economy.
For decades, oil-consuming countries in the West have yearned to wean ourselves from our dependence on OPEC and, more to the point, its power to send prices spiking with the turn of a few spigots. Ironically, now that we no longer rely directly on the cartel for fuel the way we once did, suddenly we wouldn’t mind if they behaved exactly as we once feared.
So what’s changed? For North America, quite simply, it’s energy independence. Long the holy grail of US energy ambitions (and, by extension, many Canadian ones as well), the shale revolution has essentially made it a reality. Not long ago it wasn’t that uncommon to see a US president fly to Saudi Arabia to plead for more production and relief from the economic yoke of high oil prices. These days, we’d be more likely to see President Obama or Prime Minister Harper making the trip to lobby for the opposite on behalf of North America’s oil producers.
One’s take on oil prices, like so much else, is a matter of perspective. Once upon a time, we used to see OPEC from the point of view of oil consumers. As production has gone up around North America—in Alberta, Saskatchewan, North Dakota, Texas and elsewhere—our frame of reference has changed. Burgeoning oil production in Canada and the US means high oil prices are no longer the economic bugaboo they once were.
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