After he has thanked his supporters, made an appropriately gracious nod to his opponent and delivered the customary eulogy to the American constitution, Barack Obama should deliver a silent prayer of thanks to the most hated industry on the planet. If the outlook for the U.S. in Obama Mk. 2 is anything better than four years of dreary impoverished toil, it is because oil companies have given him a gift – an abundance of cheap fuel. As the incredibly inexpensive oil and gas bubbles up through shale in Texas, Montana and North Dakota, political leaders in Europe, China and India gaze at President Obama in jealous amazement. How could any leader be so lucky? Is this the true meaning of American exceptionalism?
American liberals (and more than a few lefty Canadians) will find this extremely irritating. Surely, the message of this election was that U.S. citizens shrugged off the disappointments and broken promises of the last four years and renewed their faith in a leader who promised that good government could mend a dreadfully indebted, unequal and divided society. That may be true, but President Obama also knows that a fractured country cannot be put right by a government that is broke. There may not be enough oil in the Bakken Formation to pay back a trillion dollars in borrowing, but shale oil and gas development represents a springboard or a lever for American industry — at the very least, a breathing space. Abundant, cheap energy provides a competitive edge that America sorely needs, and it has arrived at exactly the right time, when Asian competitors are struggling with higher costs. Expensive marine and jet fuel is eroding the price advantage of Chinese exporters, just as cheap natural gas is encouraging U.S. industrial investment.
President Obama should not only take heart from the prospect of industrial renaissance (more blue collar jobs, fewer bonuses for button-down Wall Street). He should also be aware that a million extra barrels per day of U.S. oil output will change the diplomatic equation, too. America does not need more oil, so it will just import less. At the same time, the demand for oil in Asia will continue to rise, and nations such as China and India will find themselves more beholden to oil satraps in the Gulf.
As Americans begin to feel more comfortable about paying for A/C and filling up the Chevy, they may begin to develop a more thoughtful view about the Middle East. There is an opportunity to develop a foreign policy less dependent on crude barrels, but there is also a risk that American influence will dwindle East of Suez as the Gulf states look more to East Asia for their inspiration as well as their receipts.
For more than two generations, U.S. foreign policy towards the Middle East has been hamstrung by two considerations, the protection of Israel and the protection of oil cargoes. But the balance of power is changing. Despite a complete collapse in Iranian oil exports over the summer, the Brent crude oil price has not soared. Fearing an oil glut, the Saudis have been stockpiling crude, and it is now reasonable to assume that even an Israeli bombing raid on Iran's nuclear facilities would barely nudge the oil price. Meanwhile, Israel is on the cusp of its own energy boom, fed by offshore gas discoveries that, over the next ten years, could transform the economic fortunes of the Jewish state and reduce its dependence on U.S. remittances.
This is an opportunity for President Obama to begin to speak to the Middle East without oil-soaked hands. If the oil weapon is now a mere squib, America can also begin to end its indulgence of Israeli nationalism and insist that Israel normalises its relations with its Arab neighbours and fully supports the creation of a Palestinian state.
There is a political dividend in shale that will go beyond four years and resonate past the borders of the U.S., but President Obama needs to be imaginative if he is to reap its reward.
Carl Mortished