It’s no understatement to say the rise of US domestic oil and gas production over the last few years has fundamentally reshaped the global economy. We layered data and charts from the US Energy Information Administration to create this GIF showing the surge of railroad shipments of crude oil out of the US oil and gas patch in recent years.
US production has hammered the price of crude oil, which remains down by more than 40% over the last six months. The surfeit of US domestic energy has cut deeply into American demand for foreign energy. And this combination of falling prices and falling demand has drastic implications for countries around the world.
Venezuela, a key US oil supplier, looks increasingly shaky to international investors who are worried that the country won’t be able to generate enough cash to service debts by selling oil. In Nigeria, exports to the US have collapsed. In Russia, the decline of oil revenues—coupled with sanctions levied in response to Russia’s Ukrainian adventures—have undermined confidence in the currency and sent the country hurtling toward recession.
Declining energy costs have also handed a windfall to consumers and governments in energy-importing countries such as Japan and India. And by lowering inflation around the world, falling oil prices have done what most developed countries have had trouble accomplishing in recent years: they’ve generated real wage increases (meaning increases in wages, adjusted for inflation.)
The increase in real wages has happened, for instance, in the US. But that doesn’t mean that the surge in US domestic oil production comes without cost. America’s railroad infrastructure has proven itself to be underprepared for the task of shipping tankers of highly flammable crude oil around the country. A number of spectacular explosions have ensued.
There are also indications and lingering worries that hydraulic fracturing techniques—in which chemicals and water are pumped into the earth in order to crack and release reserves of oil and gas trapped in shale formations—could have longterm environmental consequences. Over the weekend, the New York Times reported on a spate of earthquakes in the US oil patch that some scientists link to injections of vast amounts of oil-and-gas wastewater into the earth near fault lines.