Swinging shale: Shale oil, the global oil market, and the geopolitics of oil

Abstract

Is shale oil "revolutionizing"the global oil market and the geopolitics of oil? If so, how? While two aspects of the shale boom- a new source of supply and a cause for the price collapse in 2014-2015-dominate the conventional wisdom, I argue that the most revolutionary change is the least understood aspect of shale oil-shale oil producers' rise as new swing suppliers due to its unique extraction technique and cost structure. Shale oil producers also differ from traditional swing producers in motives, contexts, and an amount of accessible excess capacity such that while shale oil lowers the medium-term price ceiling, it does not eliminate short-term price volatility. By examining the geopolitics of oil since the advent of shale oil, I analyze how such new market realities have or have not altered the US foreign policy on issues involving possible oil supply disruptions, Saudi Arabia's long-held special status in US grand strategy, rationale for US withdrawal from the Persian Gulf, and the foreign policy of China, the largest oil importer today, and Russia, a major petrostate.