VANGUARD - Expressing the viewpoint of the Communist Party of Australia (Marxist-Leninist)
For National Independence and Socialism • www.cpaml.org
While observers of the present US-led Cold War have tended to focus on armaments and defence budgets, the matter of oil production has also remained an important factor.
The use of 'fracking' by US oil companies a decade ago was responsible for the lowering of the price of a barrel of oil to levels too low for some countries, notably Venezuela and Iran, to seriously compete on international markets.
Oil companies now, however, have begun to experience problems with fracking: its days appear numbered, with inevitable consequences for the present US hegemonic position within international markets, particularly with new competitors emerging in the developing world.
Early in the New Year, a Wall Street Journal review of US oil production and the use of fracking disclosed the 'end of the boom is in sight', for oil companies. (1) As the boom subsides, the price of a barrel of oil has dramatically increased. While oil prices, historically, have been subject to rapid fluctuations, the overall annual average has revealed:
HISTORICAL AVERAGE – YEAR CLOSE
Year US$
2022 - 92. 31 (projection)
2021 - 75.21
2020 - 48.52
2019 - 61.14
2018 - 45.15
Source: Macrotrends.
An example of the rapid fluctuations can be seen with the price of a barrel of oil reaching US$163.90 in May, 2008, and subsequently falling to a mere US$ 20.48 in April, 2020, as the US introduced fracking as a standard production practice. (2)
The origins of fracking lay in the immediate aftermath of the Second World War, although it only became popular about a decade ago, when the US was confronted by a number of countries which had been able to use oil production as political and diplomatic leverage; Venezuela and Iran were two examples, which the US regarded as adversaries. Politics, therefore, was a decisive factor for decisions taken in Washington to use fracking as a means of the US boosting domestic production and reducing their reliance upon imports.
The US emerged, during the period, as the world's largest oil producer; its present-day ability to flood the world with cheap oil now, however, would appear to be receding with a looming crisis on the horizon. Market power has now enabled other producers to consider the renewed profitability of their own oil reserves and production facilities, which in many cases have been left under-utilised for the past decade.
While the White House has urged US oil companies to expand their present production with fracking, many are reluctant for a variety of reasons which include reallocating their revenue which has already been directed toward shareholder's dividends; the sinking of further wells is extremely costly. (3)
A further problem facing US oil companies is that production is down to about 11.5 million barrels a day, from about 13 million in 2020. While the US Energy Information Administration expect production to increase by about 5.4 per cent toward the end of the year, fracking companies have to sink hundreds of new wells just to keep production flat. Any expansion would require a much greater effort on the part of oil companies. In practical terms, the Texas-based Pioneer Natural Resources, for example, was able to raise oil production between 19-27 per cent a year during the boom period, but is now planning to increase quotas by only five per cent or even lower 'for the long term'. (4)
Fracking, furthermore, is fraught with health and environmental problems; the use of highly pressurised liquid to extract oil also releases hazardous materials, pollution and contaminated water which then enters the food chain through soil and agricultural irrigation systems. (5)
The US is increasingly being pushed into defensive positions: they are slowly losing traditional global hegemonic positions and China will eventually become the world's biggest economy by the end of the decade. The issue of oil as a fundamental factor also remains an important consideration: the Chinese economic development One Belt, One Road initiative, furthermore, will create favourable conditions for improved transportation, logistics and supply-lines for many smaller oil-producing countries, accompanied by favourable diplomacy. It will have a major impact upon the US which has already been shown to be increasingly incapable of successfully competing with China and their diplomatic initiatives in the developing world.
Australia needs an independent foreign policy to distance ourselves from likely real-war scenarios as the US moves into a period of desperation and war-mongering!
1. Fracking boom over as wells start to run dry, The Weekend Australian, 5-6 February 2022.
2. Oil Prices – Macrotrends.
3. Weekend Australian, op.cit., 5-6 February 2022.
4. Ibid.
5. See: The Health and Environmental Effects of Fracking, Fracktracker Alliance, 2022.