One word: Fracking.
Holman Jenkins in The Wall Street Journal explains:
To belabor what was once obvious, instability in the Middle East typically has been bullish for oil prices, as witnessed by various Arab-Israeli wars and Iraq’s wars with its neighbors. Saudi jets have already entered the fight to stop Iran’s allies in Yemen. If necessary, Saudi troops will likely intervene on the ground, waging a fight that would also be a fight for the interests of global oil consumers.
A direct confrontation between Iran and Saudi Arabia over Yemen could be shaping up. Iran is on the march in Iraq and Syria. Much of the Middle East is in chaos. That all this could be happening and yet oil pundits are more concerned about oil dropping to $20 a barrel, because of a lack of storage to accommodate our abundance, testifies to a geopolitical somersault the world is still trying to make sense of.
Fracking overnight has relieved Saudi Arabia of its swing-producer dominance. Fracking overnight has relegated the Middle East to a sideshow, albeit a still-important sideshow, in the world economy.
I’m rearranging the order of his points to highlight this:
To register panic about all this and drive up prices, however, oil buyers have to be able to hoard oil. That’s becoming all but impossible. A huge amount of surplus production is already sloshing around the world, mostly as a result of U.S. fracking. As a consequence, storage tanks are full to overflowing. Panickers and speculators may well be physically unable to drive up prices significantly if they wanted to.
Readers will recall that a foundational purpose behind North Carolina’s renewable portfolio standards mandate, which forces utilities to use increasing amounts of far more expensive renewable energy, was
Provide greater energy security through the use of indigenous energy resources available within the State.
That law was passed just before the hydraulic fracturing revolution, back when Middle East turmoil was a conceivable threat to the state’s energy security and “peak oil” was still greatly feared.
But while federal and state policymakers were trying to force a nondispatchable technology into the starring role, entrepreneurs were finding the surprisingly simple answer to one of energy’s holy grails, getting resources out of solid rock — which they solved with just water and sand.