There’s a reason that Obama and his liberal allies are doing everything in their power to bring the fracking revolution to a halt. Or why Hollywood is churning out anti-fracking propaganda flicks like The Promised Land with gulf oil money.
The US shale gas boom, drastically cutting the cost of gas, is shaking the foundations of the Saudi Arabian economic model—and more is coming. The highly profitable $100bn Gulf petrochemical industry is taking a hit as its biggest customer—the U.S.—is importing less and relying instead on domestic production.
US gas prices have plummeted due to new techniques, known as fracking and horizontal drilling, developed to extract the vast deposits of shale gas in the North American bedrock. Production has jumped by nearly a quarter since 2000, reducing demand for Saudi gas. If China figures out how to exploit its own shale gas reserves the Saudis will have every reason to be nervous. The two pillars of the Saudi economy—oil and petrochemical exports—will both be on shaky ground.
And already falling demand from China is having an impact on the Saudi economy.
Sabic, which has felt softer demand from China, has reported declining profits in every quarter so far this year. In the third quarter net income fell 23 per cent from the year-earlier period; it fell 35 per cent in the second and 5 per cent in the first quarter.
There’s not much that the Saudis can do about China, but the Saudi Lobby has been a longtime player in the American political scene and the Gulf Oil States combined are a formidable force not just on Capitol Hill, but in the media and the culture, where they successfully undermined the War on Terror using not just lobbyists but also public relations firms.
As far as the Saudis are concerned, they own the American energy marketplace, and they need it badly. And it may be in part the growing threat of Western energy independence that drove the Arab Spring-Islamic Winter wave of coups against Arab countries allied to the United States and possessing exploitable quantities of gas reserves.