The plummeting price of oil since Saudi Arabia decided last fall not to cut production to counter rising supply elsewhere has fueled intense speculation about a downfall of the infamous cartel, once feared for its power to bend oil prices to its will. Was OPEC’s biggest oil producer unwilling or just unable to stop an emerging glut? Does this mean oil will never again reach $100 a barrel — where the spendthrift governments of the Organization of the Petroleum Exporting Countries need it to be?
What’s missing from the discussion is an understanding of how the oil market got to this juncture and, notably, who brought it here. The answer is surprising. It was the United States, mostly. Last year, the United States produced more oil than it had in 25 years, surpassing Saudi Arabia as the world’s largest producer.
Perhaps the most intriguing part of this story is that one of the main participants in this revolution is the American government. Facing fears of a broad energy shortage, in the shadow of an embargo by Arab oil producers, the Nixon administration and Congress laid the foundation of an industrial policy that over the span of four decades developed the technologies needed to unleash American shale oil and natural gas onto world markets.
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