Environmentalists who oppose shale drilling have found an unlikely ally. The Organization of the Petroleum Exporting Countries, meeting in Vienna this week, has also played up safety concerns with hydraulic fracturing. That’s partly because fracking threatens to erode the cartel’s global market share and clout. But OPEC’s best strategy to slow the shale revolution may well be to keep oil affordable.
America’s private-sector drillers tend to minimize environmental concerns over fracking, the drilling technique that enables them to extract oil or gas from rock. By contrast OPEC, the 12-nation club including Saudi Arabia, Iran and Venezuela that pumps close to 40 per cent of the world’s oil, has persistently fanned doubts over the safety of shale. The group’s secretary general on Wednesday voiced concerns about the possible contamination of water supplies. The group’s flagship annual outlook also linked fracking to problems including high carbon emissions and wasteful water usage.
Much of this may be wishful thinking on OPEC’s part. Thanks largely to shale, the United States has been enjoying a renaissance in oil and gas production. As a result, U.S. imports of foreign oil have fallen below 50 per cent of consumption for the first time in over a decade. That trend could undercut the geopolitical power of OPEC and would be particularly bad news for some Gulf states, which lean heavily on the United States for military support. It is far from certain that China, on track to take over from America as the world’s largest oil importer, would play such a protective role.
The global potential of fracking deepens the worry for OPEC. China, Australia and parts of Europe have what may prove to be chunky shale-based reserves of oil and gas. It’s hard not to read this concern into an OPEC publication earlier this year that warned the British that developing shale deposits might conflict with reducing greenhouse gas emissions.
Self-interested environmental advice is unlikely to carry much weight. OPEC’s strongest card is its ability to influence global oil prices. Shale exploration in countries outside the group has been encouraged by high crude prices. Some members wouldn’t like it, but the easiest way to keep shale at bay may be to ensure crude prices remain manageable.