Ahead of next week's OPEC summit in Algeria, global oil prices could be poised for an upturn.
Saudi Arabia, the world's largest exporter of oil, has offered to strike a deal with Iran to cut back on record levels of output if its rival also puts a cap on production, Reuters reported on Friday. If accepted, it would be a breakthrough for Saudi Arabia, which saw an earlier attempt to strike a pact with Iran declined back in April.
Other big producers have also held meetings aimed at getting the price per barrel back up: On Monday, Venezuelan president Nicolas Maduro said that a deal between OPEC and non-OPEC countries to stabilize the global market was close to being struck, after he met with Iranian president Hassan Rouhani.
In a report published on Wednesday, international ratings agency Standard & Poor’s also predicted an upturn through the rest of this year, adjusting its forecast from $40 per barrel to $42, according to CNBC.
But experts see no radical difference over the medium term, underscoring the extent to which the global market – and the United States, historically so dependent on foreign energy – may be insulated by the boom in shale gas for the next several years.
“I would not expect a major and rapid change in oil prices, but we can expect a gradual increase over the coming months,” says Carlos Pascual, a senior vice president at market analytics group IHS and the former international energy adviser to the Obama administration.
Shorter-term shocks are still possible. On Tuesday, The New York Times reported that many international oil traders are worried that collapsing production from Venezuela – whose state company PDVSA accounts for about 2 percent of the world’s output – could bottom out. Two percent might not seem like much. But in 2003, the Times noted, when strikes by PDVSA workers brought production to a standstill, oil prices spiked 30 percent globally.
“The major risk for rapid change is a collapse in Venezuela, which would take significant barrels off the market,” Mr. Pascual writes in an email to The Christian Science Monitor. “In such an event, all bets would be off on production decreases anywhere.”
Tyler Priest, an associate professor of history and geography at the University of Iowa who studies the history of oil and energy, tells the Monitor that a price rise could simply call forth more production, especially from shale areas in the United States.
“In this world now, I don’t know how long higher prices can be sustained,” he says.
That has been good for American consumers. And an abundance of shale gas also gives the US extra geopolitical leverage, as no shortage of analysts have pointed out: In 2015, only 24 percent of the petroleum consumed by the US was imported from abroad, the lowest level since 1970, according to the US Energy Information Administration (EIA).
“The more that the US can replace imports with domestic production, the stronger position it puts the country in geopolitically,” says Dr. Priest.
Nor can the success of US oil corporations be easily duplicated elsewhere, as Maria van der Hoeven, then the chief executive of the International Energy Agency, noted in an interview with The Christian Science Monitor in a 2014:
“The land ownership and the resource ownership go together here in the United States – the only country where that is the case. It’s also about having the right gas industry, the right knowledge, the right infrastructure, the water, the human skills, the geological information, etc. And geology in this part of the world, especially where the shale gas boom is, is quite different from Ukraine or Poland. You can learn from it, but it’s not a copy-and-paste.... The point is there’s a lot of shale gas in the world, but it’s not as easily accessible as it was in the United States.”
About a decade remained in the US shale boom, she told the Monitor then, at which point the power of Saudi Arabia and the Gulf states would likely reemerge.
Perhaps the most important question is whether the boom in shale gas – whose extraction has triggered earthquakes, and is generally considered wasteful and malignant by environmentalists – could still allow for a transition toward renewable energy.
“For years, environmentalists have hoped that the imminent exhaustion of oil will, in effect, force us to undergo this virtuous transition; given a choice between no power and solar power, even the most shortsighted person would choose the latter,” wrote the Atlantic in 2013. “That hope seems likely to be denied. Cheap, abundant petroleum threw sand in the gears of solar power in the 1980s and stands ready to do it again.”
Others contest the idea that cheap oil will put the brakes on renewables, with some studies showing that the former has a limited effect on the adoption of the latter. In the end, it may come down to the will of governments.
“You need subsidies for renewables because we are not there yet, by far,” Ms. van der Hoeven told the Monitor. “You need subsidies not only for technologies that are economically more or less viable, but also for new technologies to come. Governments need to use their money to really push technology development and new types of renewable energy that are still in a lab stage or in a pilot phase.”