Donald Trump wants to start drilling for oil in Alaska, which will make America no longer dependent on Saudi oil. As we read in one report from the Houston Chronicle:
Drilling for crude in the Arctic National Wildlife Refuge may be just the start as President Donald Trump seeks to revive Alaska’s beleaguered oil industry.
Republicans in Congress handed the industry a long-sought victory on Tuesday, approving exploration in the vast Arctic preserve as part of their tax overhaul. The legislation, which Trump is expected to sign into law, would lift an almost 40-year old ban on prospecting for oil and natural gas in the refuge’s coastal plain, where endangered polar bears, caribou and other species roam.
“It’s a recognition that the era of oil is not over in Alaska,” said Kara Moriarty, president of the Alaska Oil and Gas Association, a trade group. “Clearly we have an administration that believes that America can be energy dominant, and that is a complete 180-degree shift from the previous administration.”
Republicans included the refuge in their bill as a revenue source, saying the drilling will generate $1 billion to offset tax cuts over the next decade. Trump’s expected to sign the legislation as soon as Wednesday. The administration has promised to fast-track lease offerings in the area, which could draw interest from operators including Exxon Mobil Corp. and ConocoPhillips.
Drilling in Alaska is going to hit badly Saudi Arabia’s oil industry. As we read in a report from Amy Myers Jaffe of the Houston Chronicle:
About a year ago, a seasoned U.S. oil leader with deep political connections explained to me that U.S. shale would be out of the woods by 2018. He thought that the U.S. economy would see improved growth under President Trump, pulling up global gross domestic product — and with it, oil demand.
That growth would mean Saudi Arabia would be closer to maxed out on its capability to produce oil, no longer a significant threat to U.S. shale.
Under this worldview, American producers would be able wrest more market share in the future without fear of toppling prices, hence the Trump administration’s optimistic view of U.S. energy “dominance.”
At the time, it seemed like a rosy prognostication. I pointed out how easily Russia, armed with a cheap rubble and flexible tax policy, could also increase its own oil output.
But 2018 is now around the corner, and that conversation now seems somewhat more prophetic. It raises the question: What would it mean for Saudi Arabia and U.S. shale producers if Russia does an about-face and makes a production push?
It’s something to watch.
Because, while Saudi Arabia might not be technically maxed out, global demand is on the rise and Saudi ability to flood the market to punish challengers is, at least for the moment, greatly reduced.
Not only is the kingdom boxed in to supporting higher prices because of domestic economic pressures and its planned initial public offering (IPO) of state oil giant Saudi Aramco, it is also facing long-term oil field problems that will not be cheap or easy to fix.
Soon Saudi Arabia will no longer needed by the US. What then will happen? Iran, which is filled with hatred for Saudi Arabia, is eventually going destroy that country. No matter one’s wealth, the horrors of war will come.