Half of Saudi Arabia’s oil production was torched over the weekend thanks to a drone strike.
It remains in question as to who is responsible for the attack — Yemen’s Houthi rebels claimed responsibility, but U.S. intelligence is reported to believe Iran is ultimately behind it (and the President indicated this on Twitter, too).
Nevertheless, roughly 5.7 million barrels per day of oil are out of commission.
Had this happened a decade ago, the world might have spun into a frenzy. But after a Monday morning cost-per-barrel spike of 14 percent — which is largely being chalked up to uncertainty — prices dropped almost four percent.
Todd Staples, President of the Texas Oil and Gas Association, told The Texan, “Events like this are certainly meaningful and impactful but the good news for consumers is that hopefully the impact on price will be moderated somewhat, and that is largely due to the resurgence of the American energy industry.”
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Saudi Arabia is responsible for roughly 12 percent of worldwide oil production. With half of that temporarily gone (Saudi Arabia said after the attack full production levels would return in two to three weeks time), America (18 percent) and Russia (11 percent) are the only producers remaining above five percent of worldwide production.
So why did this significant hit to worldwide oil production not result in a worldwide panic? Well, Texas likely has a lot to do with it.
“Without the vast supplies that the State of Texas has provided to energy consumers, it’s wild to think about the largest attack and disruption on [oil supply] in history — and yet the price impact has been pretty marginal,” Nick Loris, an energy and environmental economist with the Heritage Foundation told The Texan.
In 2018, what had long been a political talking point — reaching “energy independence” — became a reality. The United States became a net oil exporter and it is largely thanks to the immense success of Texas’ energy industry.
“Thanks to the innovation and entrepreneurship of pioneers in Texas, we have gone from predictions in the late 90s of ‘peak oil’ to now the United States diminishing our dependence on Middle East oil to about 10 percent of our total use,” Senator John Cornyn told The Texan.
When the fracking boom hit at the turn of this decade, according to the Texas Railroad Commission, oil production went from just over 350 million barrels per year in 2010 to over 1.2 billion barrels per year in 2018.
Coinciding with the fracking boom, in 2015 Congress lifted the 40-year oil export ban.
Cornyn mentioned this specifically in relation to the Saudi Arabia attack, saying, “What has happened as a result of Congress lifting the export ban on petroleum is now you literally have a global market which cushions the shock from attacks like we saw in Saudi Arabia.”
“This is one of the geopolitical impacts of American energy production — something far beyond just the economic impact of lower prices we consumers benefit from,” Cornyn added.
He concluded, “[American energy production] is making us more and more independent to shocks to the world oil supply that would have sent us reeling just a few short years ago.”
On this particular point, Staples added, “The expansion of all phases of production, pipeline capacity, refining capacity, and the expansion of our ports here in Texas means that the impact of these types of events will not be as dramatic as they once could have been.”
After the attack, President Trump announced his federal agency directive to “expedite approvals of the oil pipelines currently in the permitting process in Texas and various other States.”
Looking ahead, Texas Comptroller Glenn Hegar told The Texan, “Texas oil production was already playing a critical role in our nation’s push toward energy independence. After these attacks, that role will only become more important.”
He continued, “Volatility in energy markets in recent years has prepared Texas producers by forcing them to innovate and increase efficiencies, while investment in pipeline and export capacity has elevated our role in the global market.”
“Texas oil will be crucial in maintaining stability globally and ensuring domestic security as the Saudis work to bring capacity back online and the market grapples with the increasing risks and uncertainty surrounding Middle East production,” Hegar concluded.
For a policy expert like Loris, Texas’ energy success is tantamount to global energy access.
“The United States’ energy production, with Texas leading the way, has really provided energy consumers with a cushion that just wasn’t there a decade ago and has meant a lot for the stability of the marketplace.”
The geopolitical ramifications have yet to unfold, but for now, the economic impact has seemingly been mitigated, and Texas is a big reason for it.
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This content was originally published here.