Whatever you think of President Trump’s decision to recognize Jerusalem as Israel’s capital, it points to the most important strategic reality in the Middle East: Arab power has collapsed in the face of low oil prices and competition from American frackers.
The devastating oil-price shocks of the 1970s, orchestrated by the Organization of the Petroleum Exporting Countries, nearly wrecked the world economy. Ever since, the U.S. has looked for ways to break OPEC’s parasitic and rent-seeking grip on the oil market—and thereby to reduce America’s geopolitical vulnerability to events in the Middle East.
Victory did not come easily. Intense conservation efforts made the U.S. much more energy-efficient. New oil discoveries in Africa and elsewhere significantly broadened the available supply. Renewable energy sources added to the diversification. But the most decisive development was that decades of public and private research and investment unleashed an American oil-and-gas boom, leading to a revolution in energy markets that has sent geopolitical shocks through world affairs. The consequences reverberate in the Middle East and beyond. Future oil revenues to countries like Saudi Arabia, Iran, Venezuela, Russia and Iraq will fall trillions of dollars short of what once might have been expected. The shift in energy markets will benefit consumer economies like Japan, China, India and the nations of the European Union. The U.S. and similarly situated nations, like Australia and Canada, can look forward to faster growth and greater foreign investment, since they will capture much of the oil revenue that Russia and OPEC lose.
Low energy prices already have given the EU’s struggling southern countries a chance to return to growth. They have limited Russia’s prospects and forced Vladimir Putin onto a tight budget. They have largely offset the gains Iran had hoped to make from signing the nuclear deal and escaping Western sanctions.CONTINUE AT SITE
