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.”