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The Ukraine Crisis Is Bolstering America's Oil And Gas Boom

The hand-wringing over what to do to help Ukraine has had a very positive impact on the U.S. oil and gas industry. Politicians like Sen. Lisa Murkowski (R-AK) are seizing on the crisis to call for a lifting of the ban on U.S. oil exports — the better to counterbalance Russia’s petro-influence. While the Wall Street Journal this morning wrote that western politicians are working on a variety of options to help “loosen Russia’s energy stranglehold on Ukraine” including “larger exports of U.S.-made natural gas.”

Nevermind that the U.S. currently exports no natural gas in the form of LNG because new liquefaction plants won’t be completed until late 2015. The bigger point was made by economist Ed Yardeni in his morning note today: “By invading Crimea, Russian President Vladimir Putin may have succeeded in resolving the debate in the U.S. about whether or not we should export natural gas and crude oil.”

Yardeni noted this New York Times editorial over the weekend as proof positive that the Obama administration (and the rest of the left-leaning side of the political class) now embraces U.S. energy exports as a potentially powerful political tool. When even the New York Times editorial board defies the anti-fracking lobby to conclude that “natural gas exports could serve American foreign-policy interests in Europe” it indicates that LNG exports are something we can all agree on.

And get this, another Times story reveals that Hillary Rodham Clinton has for years been in favor of “channeling the domestic energy boom into a geopolitical tool to advance American interests around the world.” The former Secretary of State supposedly set up an 85-person bureau at the State Department in 2011, for the purpose of doing just that.

Naturally we haven’t heard about it until now. Because if Clinton were to voice support for using America’s energy riches as a geopolitical policy tool, that would be tantamount to stamping her seal of approval on fracking. We all know how much Hillary’s base on the left disapproves of fracking, but the simple truth is: there can be no natural gas boom without it.

With the tea leaves showing administration approval of the pipeline to be all but inevitable, it makes sense that Clinton will want to show that she’s long been in favor of Keystone. It’s the State Department as well that plays the point on the approvals process for cross-border pipelines like the Keystone XL. Now that the Ukraine situation has made it politically expedient, both President Obama and Clinton can finally get behind the approval of the Keystone pipeline under the cover of strengthening America’s energy infrastructure the better to deal with Putin’s thuggery. As a WSJ editorial stated a few days ago, “An added benefit is that by disappointing his climate-obsessed financiers, Mr. Obama might restore some of his international credibility.”

This will have very meaningful implications for the next presidential race. If Hillary is now trotting out this State Department energy bureau as proof of her support of America’s energy might, then she can’t possibly campaign for president as being anti-fracking. Nor could she legitimately get away with the left’s knee-jerk demonization of the oil and gas industry.

So let the boom times continue!

Indeed, there’s no reason why America’s energy boom shouldn’t receive bi-partisan support. In eight years the industry has boosted natural gas output by 36% to nearly 26 trillion cubic feet per year. And in just three years oil production is up 45%, to 8 million barrels per day. This growth has created more than 1 million jobs and fed tens of billions of dollars in royalties into state and federal coffers.

Yet the extension of America’s energy might as a political tool could have enormous implications for the likes of ExxonMobil. As politicians get serious about dissuading Putin’s aggression, we could well see a sanctions package forcing Exxon to put its Russian projects on hold.

Through a joint venture with Kremlin-controlled Rosneft Rosneft, Exxon is working to export the fracking and drilling technology perfected in the United States over to Russia, where the companies are set to explore the shale oil potential of the Bahzenov, a shale layer thought to have similar characteristics to the Bakken of North Dakota, but more than 10 times bigger. Exxon has some 11 million acres its exploring with Rosneft across Russia. Just last week Exxon execs said they would not move ahead with a gas project in Ukraine.

Blocking investment in Russia wouldn’t be good for Exxon shareholders, but in the long run it would likely help lengthen America’s oil and gas boom — creating that much more incentive for the likes of Exxon to invest at home rather than abroad, and work to deepen the heft of America’s energy influence.

In the 1980s it was the arms race that ultimately bankrupted the Soviet Union. Looking back 20 years from now we may well be able to thank the American energy boom of the 2010s for bankrupting Vladimir Putin.


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  • Twayne Twayne 9 months ago

    Russia has enough gas to bankrupt US investments in LNG infrastructure. If Putin decides to cut deals that would damping global natural gas prices, the US tracking boom would crash. They could do the same with oil. If they pour enough on the market to drive prices down to $70.00 the expensive fracked oil would stop flowing. The could be seen as irrational acts counter to market forces but its the same as US threats of sanctions. Sanctions are an act of economic war that could bring unintended consequences. Thinking that the US could bankrupt the holder of the largest energy resources on the globe is bankrupted analysis.

  • okcomputer okcomputer 9 months ago

    Christopher, why did this simplistic comment get called out?
    a. it’s pretty clear that Russia can’t just ramp up the production and cause oil prices to crash. they have ramped up production over the last several years but it hasnt been dramatic… as one would expect. Given their economic woes you think they would have opened the spigot more if they could have.
    b. if they did cause oil prices to crash, Putin’s share of the pie would get smaller. a huge portion of each bbl/mcf produced in Russia goes to their treasury. Just b/c oil prices crash demand won’t suddenly skyrocket… the rate of growth in global demand has been slowing down as well. there will just be less pork for the Russian treasury. Pretty clear Putin’s about as interested in $70 oil as any shale producer… and has about the same wherewithal to outlast that… meanwhile, KSA, does have the ability to turn down production to help its allies out….
    c. focusing on things like “largest energy resources” is about as useful as PXD claiming that there are 50 billion bbls of recoverable oil in the Permian alone.

  • Gerald O'Hare Gerald O'Hare 9 months ago

    This shale situation is a gift from God. In the 21st Century economic warfare can replace actual warfare and more effectively win our battles. Putin has stupidly enlightened us and doomed himself.

  • winstonblake winstonblake 9 months ago

    It is time for the EUSSR to get off of the US military welfare they have been on since WW2.

    What army is protecting the US border? Russia has real soldiers on their border and no gay pride marches.

    Imagine that.

  • Andrew B Andrew B 9 months ago

    Do you folks actually fact check these articles before you write them?

    The US imports around 8 million barrels of oil per day and we are still a net importer of natural gas from Canada and Mexico to the tune of 1.5 TCF per year.

    If we “export” some of our own insufficient production, we will just have to turn around and import additional foreign production. The other alternative would be to slow down exploitation of the Canadian Tar Sands, which rely heavily on natural gas to separate oil and sand. Which would mean more oil imports.

    We hardly have anything close to the spare capacity to replace Russia on the European market as a major supplier of fuels.

    Our politicians know this, of course, as do media which can be bothered to refer to the website of the US Energy Information Agency. Which of course makes it obvious that putting such misinformation out there in the news is clearly done with an ulterior motive.

    The real purpose of exporting American production is to raise American natural gas and oil prices to world market prices. Right now, we American consumers enjoy low prices of both. This undoubtedly makes the producing American companies and landholders upset that they are getting a lesser cut than the likes of King Saud and Vlad Putin.

  • Christopher Helman Christopher Helman, Forbes Staff 9 months ago

    @andrewb i’m sure you’re already very well informed on this, but for more insight on why it makes sense to allow exports of crude oil from the US, check out this piece: http://www.forbes.com/sites/christopherhelman/2014/01/31/why-americas-crude-oil-export-ban-should-be-lifted/

  • winstonblake winstonblake 9 months ago

    Those great debts really knock me out
    They kick the West’s behind
    Angela’s blubbery cellulite is hanging out
    That EU troika is always on my, my, my, mind

    Take me to the Carpathian Mountains way down South
    Let me foreclose your daddy’s farm
    All the way the bankers’ hands are reaching out
    Come and grease your comrade’s palm

    I’m back in the EUSSR
    You don’t know how lucky you are… boy…

    Back in the EU
    Back in the EU
    Back in the EUSSR

  • Fran Watson Fran Watson 9 months ago

    If you think it’s just Hillary’s left that hates the thought of fracking, you are wrong! I’m an Independent and a lot of us are against fracking also. It is destructive, the chemicals involved destroy our water, the millions of gallons of water used makes it stupid for use in the west because we are in a drought, plus it causes more earthquakes. Check our Oklahoma. It also causes many oilspills because the pipes aren’t up to par for something like this. Check out all the states that have had oil spills with damaged water, soil, food. The oil corporations are just trying to kill us for profit.

  • Ding Bat Ding Bat 9 months ago

    The author Christopher is either misinformed or pure lazy to get his facts right. Bottom line ….. US is very dependent on imported oil and gas.
    Fracking destroys environment.

    So does Chris want Putin to wait for US to destroy itself supplying energy to EU ?
    I cant believe Forbes can stoop so low to misinform readers.

  • Scott Barnes Scott Barnes 9 months ago

    “I have found that this substance has always had such an effect, and I foresee, other substances, which are in appearance, will be attended with similar effects.
    “I shall allow other, if you please that the proposition be inferred. But if you insist that it’s made by a chain of reasoning, then I desire you to produce them.
    “Power is a great part of our ideas”

  • Josey Michael Josey Michael 7 months ago

    so our govt wants the American people to pay more so we can subsidize Ukraine and and God knows who else? BS I don’t want to pay a penny more for them or anyone else!!!!!

  • jnffarrell jnffarrell 3 months ago

    Author gives the best reason yet for puting the kibosh on Putin’s use of Wester $s to fund risky ventures that will be written off against Western Tax liabilities. Three year moratorium on Western investment would completely change the dynamics of Eurasian natural gas production,making Chinese fracked gass central to the Chinese market. Why not stay the frack away from Russian flatulence?