Energy security

The geopolitics of energy: Will a boom follow today’s bust in energy prices?

Energy prices are cyclical—history is replete with examples. Booms follow busts, rinse and repeat. The high prices of 2014, around USD$100/barrel, dipped to less than USD$30/barrel in late 2015 and are now beginning to recover. But the boom–bust cycle of oil prices has found a new normal, driven by materials breakthroughs in horizontal drilling and fracking. To say that few saw today’s bust coming after the high prices of recent years is an understatement. For sure, the benefi ts of horizontal drilling and fracking drew attention to innovations happening in the United States and elsewhere. I remember watching the Saudis experimenting with horizontal drilling in 2006, from a visitor’s perch at Saudi Aramco, a Saudi state oil and gas company. Saudi engineers were already talking about innovations in the United States and wondering what increased US energy production would mean for US–Saudi relations, in particular, and US–Middle Eastern relations, in general. Although there was some concern in Riyadh and Dhahran, no one attached much urgency to these worries because while supply would likely increase among some energy producers, all other indicators suggested that demand would far outstrip it.