Advertisement

You will be redirected to the page you want to view in  seconds.

The United States recently surpassed Saudi Arabia as the largest oil supplier in the world. / Corbis

In 2011, the U.S. government was weighing a step it had never taken in its bid to quash Iran's nuclear program. What was on the table: Requiring foreign countries to slash their oil purchases from Tehran or, should they refuse, face draconian sanctions. The idea was to ratchet up the pressure on Iran, but there was angst within the White House and the business community about how badly the move could unsettle oil prices and, with it, the fragile global economy.

That's just one illustration of the very tangible - and often destabilizing - impact of energy dependence in North America. Which is why the latest trends in global energy supply are a very big deal: If you want oil and gas, you no longer have to look to Dubai or Riyadh. Look instead to North America, where the United States recently surpassed Saudi Arabia as the largest oil supplier in the world. You read that right.

For the United States, the implications go far beyond the price at the pump. The new sources of energy are what ultimately convinced Washington to clamp down on Iran's oil sales, setting in motion the steep economic decline that has brought the mullahs to the negotiating table. That's because policymakers determined that skyrocketing North American energy production would supply enough oil to cancel out the amount of Iranian oil that American sanctions would block from the market, causing little more than a hiccup in global oil prices.

More from OZY.com:

Where gas flows like water

Energy Independence Day

Mexico's modernization sprint

It's an example, according to Tom Donilon, former national security adviser to President Obama, of how the continent's remarkable - and relatively under-the-radar - energy boom of the past five years has given the United States "greater maneuvering ability to pursue our national security priorities."

And if the energy boom continues on the track that oil-market analysts predict, it could just reshape global geopolitics as we know it.

Jed Bailey, an expert on Latin American energy markets, says nobody was predicting the near-simultaneous spike in energy supply from Canada, the United States and Mexico as recently as 10 years ago, and it's prompted "a rather marked shift in how the world thinks about energy and how the world thinks about North America's role in energy markets."

The main engine behind the continent's rise has been its use of new technology, starting late in the last decade, that taps into oil and gas reserves found in underground shale rock formations - what's been dubbed a "shale revolution" - led by the United States.

Combined with Canada's development of its tar sands (the source of the oil that would be transported via the proposed Keystone XL pipeline), technological advancements in deep-water oil drilling (think Deepwater Horizon), and Mexico's recent energy reforms aimed at developing one of the biggest untapped oil reserves in the world, it's leading some experts to hail the arrival of a "new Middle East" when it comes to energy.

In fact, a group of Citigroup experts made that prediction in a 2012 report, well before Mexico's new president, Enrique Peña Nieto, pushed through constitutional changes late last year to allow foreign companies to invest in its energy sector.

North American production of "liquids" - oil, gas and biofuels - could nearly double between 2010 and 2020 or 2022, the report says, from over 15 million barrels per day to almost 27 million barrels.

Two years after the report, one of its authors says their forecast is holding up - and they may even have underestimated some of the trends. In the U.S. in particular, "I think the production has turned out to be even stronger than we anticipated," says Eric Lee, a research analyst with Citi's commodities strategy group.

What does the rise of North American energy mean in practice? It's already bolstered the American economy at a time when it desperately needed a lift. Lee says you can clearly see the impact on the GDP in states like Texas and North Dakota, which have been buoyed by oil and gas drilling, and that no doubt has helped improve the overall American jobs picture.

And the boom is just beginning: Analysts predict the United States' energy production will continue to expand at least for the next decade (there's debate about longer-term forecasts because the technology is still so new), boosting national GDP and a whole range of industries - particularly heavy manufacturing - that are affected by energy prices. Energy production is also poised to have a significant impact on GDP in Mexico - Pena Nieto's government is predicting an additional 2 percent in growth by 2025 - where a lack of investment and access to new technologies have held back its energy industry in recent years.

And thanks to 20 years of NAFTA, the effects of new supply in one North American country are being felt across the region. The United States' so-called shale revolution "had reverberations down in Mexico," says Shannon O'Neil, an expert on Latin America at the Council on Foreign Relations.

It's part of the reason, O'Neil says, that Mexican politicians took the momentous step of changing a 75-year-old constitutional law to open up their energy sector. American companies have the expertise and technology to help Mexico develop its shale resources, some of which are extensions of the same formations already being drilled in Texas. Trade and transport of energy products are also growing across the continent, bolstering all three economies and fostering deeper regional integration.

On a global level, North America is not expected to form the same sort of coordinated cabal that has allowed OPEC countries to control world oil prices for so long. But the three nations stand to enjoy far greater insulation from the ups and downs of OPEC's politics and its pricing whims. And at the same time the United States stands to pull away from the Middle East, Asia's growing energy needs are likely to drive it closer to the region, with profound implications for trade ties and foreign policy.

Speaking of petro-politics, the U.S. is about to have a pound more muscle. Which means countries like Russia and Venezuela, which often use their resources to influence their neighbors, might have a new challenger in their midst.

As for the "old" Middle East, the ascendance of a rival on the other side of the world is nothing but bad news. "It's a really disruptive change," says Lee; the bloc of countries has had virtually uncontested influence over global energy markets since the 1970s. And their governments, which rely on high oil prices to fund programs and keep their economies afloat, will feel the pinch if the increased supply coming from North America continues to push energy prices down.

Still, plenty could stand in the way of North America's challenge to Middle Eastern energy supremacy. Political factors - driven by environmental concerns, nationalist priorities and protectionist trade impulses - could snare any number of initiatives to both get at and sell the continent's oil and gas. A lack of infrastructure is already restricting energy sales in Canada and the United States, hence the push for Keystone XL, which is vehemently opposed by environmentalists.

The increase in transport of oil and gas by ship and by rail has already led to some horrific accidents over the past year, heightening concerns. And drilling itself - whether deep-water ocean wells or the hydraulic fracturing (aka fracking) technique used to drill into shale rock - remains highly controversial.

But it's hard to understate how bullish most people are when assessing North America's, and particularly the United States' energy future. At an event in Washington, D.C., in February, Donilon summed it up best: "This really does send a powerful message," he told his audience, "that the United States has the resources and the resolve to be the preeminent power going forward." Message delivered.

Ozy.comis a USA TODAY content partner providing general news, commentary and coverage from around the Web. Its content is produced independently of USA TODAY.



Copyright 2014 USATODAY.com

Read the original story: The great North American oil rush

More In

test

Real Deals

Flip, shop and save on specials from your favorite retailers in central Ohio.

GET DEALS | COUPONS

Things To Do

SAT
26
SUN
27
MON
28
TUE
29
WED
30
THU
31
FRI
1

CLASSIFIEDS

Classifieds from across Central Ohio
Lancaster
Chillicothe
Newark
Marion
Bucyrus
Mansfield
Zanesville
Coshocton

Weeklies & Shoppers

10TV Headlines

Dispatch Headlines

METROMIX