Of Course the King who passed away last week was none other than King Abdullah of Saudi Arabia who has now been succeeded by his half brother and 79 year old fountain of youth Salman. As you may know, Saudi Arabia is by far the largest exporter of crude oil in the world, selling over 9 million barrels a day.
In his final months, Abdullah, worried about a fall in market share due to a rise of alternative energy producers in Russia and North America and stagnating global demand embarked on a new policy. Saudi Arabia, the dominant member of OPEC proceeded with a policy to maintain the current level of oil production, creating a glut in supply and resulting in oil prices falling to a 6 year low of just under $50 a barrel. This is good news for pretty much everyone in the UK (with the exception of some North Sea oil contractors) who now benefit from lower petrol prices at the forecourt and should now start to see their domestic energy bills slowly trickle down too.
Without question, one of the main reasons why the Saudi’s have continued to pump excessive oil into the market is because they fear that America, traditionally the largest import market for oil and gas has found a way to substantially reduce their reliance on Middle Eastern energy. The Americans, tired of being held to ransom by the likes of OPEC, a cartel that would be illegal if it were almost any other commodity, embraced the the shale gas revolution.
It is now openly suggested that Saudi Arabia have driven the oil price so low in a mad attempt to drive shale producers out of business but one does wonder, how long will other, less cash rich OPEC members continue to go along with this policy. You also have to wonder whether America, tired of Middle Eastern conflict have any desire to ditch shale. It might not be able to compete on price (yet) but it does give something back that cheap oil from abroad can never achieve. Jobs (Shale gas supported 600,000 US jobs in 2010) and energy security (The US is no longer a net importer of gas).
I would like to see these benefits right here in the UK too. Some of the richest deposits of shale in the UK is located in my region, the North West of England. Last year it was reported that a shale gas revolution could generate as many as 64,000 jobs in the UK. Many of these would no doubt be in my region where well paid, skilled jobs are hard to come by. Shale would be a vital element to a varied energy mix. Until newer technologies can come online and provide cheap, sustainable and reliable energy we need shale to ensure our economy can grow and our energy security is not at risk.
However, earlier this week, Lancashire County Council voted to defer their decision on whether to allow the fracking of shale gas in the North West for two months, much to the anger of some environmentalist groups who would rather we had an outright ban without any debate on the issue. I should highlight that according to recently retired NATO chief Anders Fogh Rasmussen, a lot of misinformation about shale gas is driven by Russia who are panicking at the prospect of not being able to use their own natural gas resources as a stick to beat Europe with. These same groups, it would seem, would much rather our energy bills go towards lining the pockets of Vladimir Putin and absolute Saudi monarchs or failing that would be happy to see our countryside covered by wind turbines.
Many observers are also suggesting that with global oil and gas prices so low, shale gas would be unprofitable, yet even if a site was approved for fracking today, gas extraction wouldn’t take place until 2020 at the earliest. In five years time, I suspect that this current period of cheap oil and gas we are enjoying will be but a distant memory, especially when the global economy is back on the mend and growing.
Fracking isn’t something that should be imposed on any local community without consent. As much as I am in favour of fracking, the right thing to do would be for local councils to hold free and fair referendums on the matter. That way, we can have an open, honest debate that sadly some groups simply would rather not happen.