America's unexpected transformation into the world's biggest natural gas producer and one of the globe's largest oil producers will give the U.S. more geopolitical clout on the world stage—including in key relationships with China, Russia and the Middle East.
By 2020, the U.S. is likely to be energy independent, along with Canada, its biggest import and export partner. Add to that a new boom expected from a reforming energy industry in Mexico, and North America will more than hold its own as a powerhouse in the global energy market.
The ripple, however, will be increasingly felt across the world. In the next several years, the European Union could be importing U.S. gas—and possibly even oil, if current laws change—lessening Russia's stranglehold on the European economy.
As for OPEC, it runs the risk of splitting apart despite its vast reserves, as its members' interests diverge. Saudi Arabia, the world's biggest oil exporter, could use its clout to guarantee its future market share, even at the expense of other OPEC members.
Already unstable conditions in some producing countries could worsen, even in the near term. Venezuela, for example, was already struggling to maintain domestic order before its government revenue began drying up in the face of plunging global oil prices. Other OPEC members like Nigeria, having lost the U.S. import market, are looking to Asia to buy its light sweet crude.
Many of the world's consumer-producer relationships have been influenced in some way by America's new role as a top energy producer.
"This unconventional revolution is pretty recent. In terms of oil, it's only been about four years, but it's moved very fast. One question is whether the price downturn will affect the speed of growth, but I think the defining new factor for the world oil market is this growth of unconventional supply," said Daniel Yergin, vice chairman at energy and economic intelligence firm IHS. "Since 2008, U.S. oil production is up nearly 4 million barrels a day."
The energy boom that started with hydraulic fracturing and in America and grew to include a surge in drilling of so-called tight oil is still very new, and some of its biggest effects have yet to be felt.
For example, the United States will begin exporting liquefied natural gas next year, and that will feed into those Asian markets. New pipelines will also take natural gas to Mexico.
"It's going to revolutionize the way natural gas is going to price around the world. There's almost nothing that can stop it," said Edward Morse, head of global commodities research at Citigroup.
And U.S. natural gas reserves are huge. "First is U.S., then Russia, then the state of Pennsylvania, which a decade ago produced no gas," said Morse.
The arrival of more gas on the world market will also make it harder for countries like Russia to extract high prices—Moscow has repeatedly used price hikes as a geopolitical weapon against Europe and especially against Ukraine.
Francisco Blanch, head of commodities research at Bank of America Merrill Lynch, pointed out that U.S. energy production is already affecting natural gas prices, although indirectly. The drop in oil prices, due in part to increased U.S. production, is pressuring the price of LNG in parts of the world where the gas price is indexed to the price of oil.
Yergin said the ability of the U.S. to send gas around the world changes the view of the U.S. in the eyes of other major powers. "I think it gives a new dimension to U.S. influence in the world, and I think it's actually quite significant for Asia as well," he said.
"If China is an importer of U.S. LNG, that suggests a different relationship between our two countries. It suggests we're not competing for global energy resources," Yergin said. "The first U.S. LNG exports will probably go to Europe next October, and the fact that the U.S. will be a supplier of some LNG to Europe will reverberate across U.S. politics and Russia."
U.S. oil production, which stood at 9 million barrels a day in November, has clearly helped tip world supply at a time when global demand has been dropping. Technology breakthroughs, such as horizontal drilling, have helped oil production grow rapidly.
Yergin expects the U.S. to lift its ban on exports of crude oil. The industry has argued that if it does not gain the ability to export, it will limit development of fields, reducing the amount of oil the U.S. can produce and ultimately making it more expensive.
"The striking thing is, it's still early days, and people are finding ways to be much more efficient. We're moving into a period of 'super fracks.' This technology has really advanced a lot from where it was four years ago, and it will continue to really be innovated so even if it flattens out, our production has really increased," said Yergin. "In our upper scenario, related to removing the crude oil export ban ... the high level that domestic production would be at ...14 million barrels in the 2020s."
U.S. oil supply has already grown enough to divert West African imports away from the U.S. and on to Asia and other markets. Saudi exports to the U.S. fell to just under 900,000 barrels a day in August, down from a recent average of about 1.2 or 1.3 million barrels a day.
The 30 percent dive in oil prices since the summer is a direct result of growing U.S. production, adding to an oil glut at the same time demand growth is slowing. OPEC heads into its November meeting on Thanksgiving Day, appearing divided over whether it should cut production to prop up prices, or hold steady and force other producers—like U.S. shale drillers—to curb their own output.
Yergin said OPEC is fractious by nature, with players like Venezuela desperate for higher prices, and Saudi Arabia intent on maintaining its market share and preserving its role as a swing producer.
"It's really an association or conclave of countries brought together by really one fact—they all export oil," he said. "And I think as long as an OPEC framework is useful to them, they'll continue to use it when they want to. But it's not like there's a single mind that's driving the ship."
"But I think the recognition is really there now ... that this boom in the United States is not a bubble that's going away. It's sustained, and it's going to continue to grow in 2015, and meanwhile the world economy is not looking very well," Yergin continued.
Yergin said Saudi Arabia is intent on keeping its market share, and it does not want to give it up to make room for more production out of Iraq, or the return of oil from Iran, should that country reach a resolution with the West on its nuclear program. Saudi Arabia can also afford lower oil prices than most other producers. Break-even oil prices for Saudi Arabia, based on budget requirements, are at $89 a barrel. They're much higher for other producers like Iraq, which requires $114 a barrel or Iran, which needs $130 a barrel, according to Citigroup data. Some oil experts also think the Saudis can withstand even lower prices, into the low $70s.
"I think it's going to be difficult for OPEC to stay together," said Carlos Pascual, former State Department special envoy and coordinator for international energy affairs. "I think Saudi Arabia is doing exactly as it said. It is fighting for market share. I think the market share it's fighting for isn't in the United States or against the United States. It's fighting for market share in Asia. When you see where the demand is for oil, in the next 20 years all of it is in Asia."
Pascual, former ambassador to Ukraine and Mexico, said the U.S. having attainable energy resources has already made a difference in the eyes of the world.
"The fact the United States has become a major natural gas producer affects other markets. That directly affects Russia's interest. It's forced Russia to compete in European markets. It gives those countries a greater ability to be in a competitive environment with Russia, and as a result of that, it actually influences the nature of the relationship and dialogue we have with Russia," he said.
The U.S., not long ago, was expected to become an importer of natural gas, and now it expects in the next several years to become a major exporter.
"There was once a time when Russia saw the U.S. as a supplicant," said Pascual, who is now with the Center on Global Energy Policy, a research organization at Columbia University. "Now we're actually influencing Russia's self-interest."
The oil price has become a painful problem for Russia, already feeling the sting of sanctions for its invasion of Ukraine.
"The combination of the two has had a very powerful impact, and one has to look at the sanctions from this perspective. (Energy) constitutes 70 percent of Russia's export revenues, and oil and gas count for 52 percent of the budget," Pascual said. The market perception of the energy industry's growth could make banks and institutions less willing to lend.
"It's had a very negative impact on the Russian economy. The irony is it's not clear the impact on the economy has penetrated through to President (Vladimir) Putin's decision-making and his approach on the Ukraine," he said.
The rising clout of the U.S. as energy producer has also influenced its relationship with China. He said it gives the U.S. certain leeway in discussions with China "whether it's on security issues or climate issues, that makes it easier for us to take a strategic position in some cases."
Pascual said China now realizes it needs to be part of the solution for climate change, and that its recent agreement on climate change with President Barack Obama was a key turning point.