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As candidates for the 2016 U.S. general election gear up for a White House run, one villain of recent campaign cycles will be conspicuously absent: the cartel known as OPEC.
With the U.S. oil boom helping the world's largest economy churn out more than 9 million barrels per day (bpd), its highest in about three decades and up 80 percent since 2008, energy prices appear to be sidelined as political theater. Should current trends continue—prices of Brent crude and West Texas Intermediate are trading near their lowest levels in nearly 10 years—energy prices are unlikely to figure prominently in the coming presidential election.
Even as geopolitical risks in Iraq, Syria and Venezuela continue, national gas prices now hover in the $2.50 range, thanks in large measure to the U.S. oil bounty. That is a far cry from a few years ago, when average gas prices threatened $4 per gallon and oil was perched comfortably above $100.
Bob Dudley, CEO of BP, told CNBC on Tuesday at the IHS CERAWeek conference that oil is likely to remain "lower for longer. [I] don't know how long ... several years absolutely [is] a possibility.
Now that the U.S. is producing much of its own energy supplies, and with gas prices tame, the Organization of the Petroleum Exporting Countries won't loom as the boogeyman it has in prior election years, when presidential contenders were forced to address how they'd confront petro-states over costly oil prices.
As benign as the politics of oil have become for the U.S., it has become an enormous source of social strain for OPEC countries, many of which are being deprived of the currency needed to maintain social stability. According to data from the International Monetary Fund, countries such as Iran need a price of around $122 per barrel of oil just to balance their budgets. Several others need a price of between $100 and $130 per barrel to come close to breaking even.
Meanwhile, energy watchers say the U.S. could be doing even more to loosen the constraints imposed by oil producers overseas. In theory, that could heap even more pressure on oil prices.
Vincent DeVito, a partner in Bowditch & Dewey and former U.S. assistant secretary of energy in the administration of former president George W. Bush, insists the issue of oil should still be of major importance to presidential candidates. Oil's place as a national security issue and a booming market mean candidates should continue to address the subject.
DeVito acknowledges that dependence on foreign oil has decreased, but he says the U.S. "has not been exercising its producer muscle" for geopolitical and national security purposes, most notably to counter Russia's ability to strong-arm its neighbors with its oil and natural gas riches.
However, DeVito acknowledged that the U.S.' vulnerability to OPEC is starkly different from his days as an energy policymaker, when he and his colleagues were "in the Situation Room of the White House figuring out how we were going to communicate with Venezuela, because we needed natural gas" for the purposes of powering electricity.
"It was a quiet crisis within the [Bush] administration," DeVito says, "and then it disappeared" thanks to booming supplies of oil and natural gas—which has made the U.S. the world's leading nat gas producer with trillions of cubic feet of the resource.
U.S. oil producers have been steadily increasing oil production since 2008, creating a surplus of oil in the global marketplace and forcing OPEC to embrace global market oil prices. Yet the U.S. has not taken full advantage of its growing energy supplies, some say, a dichotomy encapsulated by the debate over the ban on oil exports.
"It's remarkable that this new geopolitical weapon that we have is completely off the table," DeVito said.
Carlos Pascual, senior vice president of IHS and former ambassador to both Ukraine and Mexico, says that oil exports would bring large benefits. Citing an IHS study, he says oil exports would boost growth, jobs and help push down gas prices as global crude prices fell.
Exporting oil would lead to the further loosening of OPEC's grip, which Pascual says is in the throes of "a financial crisis that has in effect torn OPEC apart, and obliterated its ability to play the kind of role it has played in the market for the last 40 years."
The impact on national security is something policymakers would do well to consider, the analyst contends. By limiting oil exports, "we provide the perfect excuse for a country like Russia to decide, if it wanted to, that restricting the export of gas for example to Europe is in its national security interest," Pascual said. "They could use the precedent of the U.S. restricting exports as a foundation for their decision."
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