American Energy Disrupts OPEC’s Influence

American Energy Disrupts OPEC’s Influence

By Ryan Sitton

The OPEC cartel’s plan to continue its production cuts for nine more months means that two worlds — energy and politics — are once again colliding. Energy observers today are feverishly trying to anticipate what will happen with the basic cost of energy, which has the ability to upset manufacturing capabilities, trade practices and even entire economic markets. With all the uncertainty, one thing is clear. American energy production is disrupting OPEC plans and influencing energy prices more than it has in a generation.

As a Texas energy regulator, I am often asked about the impact of Texas oil and gas on the rest of the world’s oil activities. Throughout my 20 years as an engineer working in the energy industry, I’ve had the opportunity to travel all over the world and witness Texas’ influence firsthand. Today, one quarter of all U.S. oil output comes from the Permian Basin, and projections show that number will continue to rise.

We watched Thursday as the advances of the shale producers in Texas and the U.S. forced the hand of the OPEC nations — and they extended cuts to support prices.

So what can we glean from the cartel’s action?  First, OPEC nations are indicating that they believe the market can come into supply and demand balance based on existing production levels. Second, it appears that OPEC countries are accepting the current price environment. Last and most notably, OPEC nations are beginning to bump up against their limits in controlling prices.

What that means for Texas oil and gas producers is that there’s more global demand that they can fill at current pricing levels. Energy exports of oil, liquefied natural gas, chemicals and refined products hold enormous opportunities for our country.

America’s energy exports have increased 334 percent in just the last 10 years, and our energy is being used to lessen the influence of Russia in Europe and provide cleaner burning energy for countries like China, South Korea, Mexico, Jordan, Pakistan, Turkey, Dominican Republic, Thailand, Kuwait and Chile.

For all of the political posturing around energy, the market forces in the United States are competing head to head with the conglomerate forces in the rest of the world. The days of OPEC using oil supplies and prices as a political weapon are dwindling. More specifically, while they still have the ability to push prices down, they are losing the ability to push them up. Now those countries, along with non-OPEC participating countries like Russia, are going to have to decide how to fund their lavish governments on the basis of a commodity whose price they no longer control.

Less OPEC oil on the market enhances the opportunity for American energy to fill needs around the world and will help us achieve energy dominance, which means producing more energy than anyone else and using that energy to enhance our economic and national security.