The recent attack on key Saudi oil installations, allegedly performed by drones, instantly destabilized the energy world. Simultaneously, it highlighted once again the importance of the shale revolution both to the United States economy and American national security.
Oil experts believe that 50% of Saudi oil capacity was disrupted by the attack, which was initially blamed on Houthi rebels in Yemen but may have been directed, if not actually carried out, by Iran. That amounts to 5 million barrels of oil a day, and constitutes approximately 5% of the world oil supply. It is likely that, regardless of whether the attack was ordered or actually carried out by Iran, it was at least Iranian inspired.
This American oil production power gives President Trump in many ways unprecedented room to maneuver on the international stage, whether diplomatically or otherwise. He can be secure in the knowledge that oil price shocks or any potential embargo will not devastate the American economy. That security will be critical as the Middle East moves farther into regional destabilization, if not worse.
The alliances that have characterized the last 70 years, already shifting, are also likely to continue fraying, with Israel, Saudi Arabia and other Sunni Arab countries eventually lining up on one side against Shia ruled Iran, Hezbollah, Hamas , and possibly the Assad regime in Syria as well. Given that uncertainty, the oil markets will be volatile for quite some time.
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