The World Energy game and Shale Oil

US and Iran are inching towards the much awaited Nuclear deal as I write. In the World energy game, America has played its card quite well, using its shale oil as the trump card. When OPEC, led by Saudis thought that the American Shale Oil industry will crash due to fall in Crude Oil price, they were wrong. They were impacted, but far from going out of business. With improved technology (America still holds an edge over its counterparts as far technology goes) it has been vindicated that Shale gas can hold on for now. It's resilience is probably the reason that the Brent's crude will stay in $30-50 range, barring any major global conflict.

 

Though America is still the world's biggest consumer of petroleum, due to its inland Shale Oil boom and production of energy efficient and electric vehicles, it is less dependent on foreign import. Recently China whose economy and appetite for energy is growing, surpassed US as the World's largest importer of oil. Less dependent on OPEC means less dependent on the Saudis. That's exactly the reason why Obama intends to sign the Nuclear deal with Iran. Once the sanction on Iran is lifted, there will be an oil glut in market, leading to further fall on price. No wonder the geriatric leadership of the "House of Saud" are getting more senile at this prospect, opposing tooth and nail, US's Iran deal.

 

But America has already anticipated this. the removal of Saddam who kept the Iranians at bay, has opened up a huge vacuum in the Middle East. Iran has fulfilled that vacuum and now controls most part of Iraq which sits upon a huge keg of oil. America realizes this and wants to bring Iran into its fold. (It's said once Chanakya told Chandra Gupta when your enemy gets powerful, it's wise to have a truce with them. (It's no coincidence that on CNN Prime Time, these days it often shows the life of commoners in Iran, they love to go for bowling and evening family outings, so that the average Joe can connect to the Javed of Iran.)

 

Also America shouldn't forget what Ronald Reagan famously said "Trust, but verify". The shrewd and pragmatic Chinese are buying a good chunk of oil from the Iranians. India, which imports 80% of it's crude is wisely buying from Iran and keeping a good relationship with that nation.

Relationships are fast changing. The Carnival Cruize lines is sending me offers on its inaugural ship to Cuba, as the small island nation opens up to America. Russia is getting friendlier with Pakistan. India's economy expected to take off next decade. It will be wise for India not to put all its eggs in one basket, especially in a world of first.