New energy dynamics: The decline of OPEC, the rise of the US—and of the Eastern Mediterranean

As global commerce reemerges from the pandemic, new patterns of energy consumption, supply, and sourcing are becoming clear. Some are due to the dramatic depression in energy demand created by the pandemic as well as the potential surge that will come with its end. Much of it, however, has to do with tectonic shifts that were underway before the lockdown and quietly matured during it. Such changes include the increasing irrelevance of OPEC, the emergence of the US as one of the world’s great energy producers, and a new dynamic in the Middle East as Israel joins the established regional network of energy exporters from the eastern Mediterranean Sea to the Persian Gulf. Ensuring a stable, reliable flow of fossil fuels to support the economic recovery from COVID-19 is bound to remain an issue of great strategic importance for the US, Israel, and their allies, even as they invest in developing alternative and renewable sources.

The Decline of OPEC

Well before its catastrophic meltdown in April 2020, OPEC had become increasingly antiquated and unworkable. As catalogued in Daniel Yergin’s The New Map, tensions between Saudi Arabia and Iran had been rising at OPEC meetings in 2019, especially after the Iranian attack on the Aramco infrastructure at Abqaiq. This attack was designed to shut down the world’s largest oil processing plant for an extended period and to demonstrate the Islamic Republic’s ability to roil global energy markets at will. Still, due to the speed of the Saudi recovery and the increase in supply from other sources, notably the US, Iran’s gambit failed and prices stabilized quickly. But the fact remains that one OPEC member had launched a military attack against another member’s energy infrastructure, making future cooperation in the organization difficult, to say the least.

Abqaiq was followed by an attempted Saudi rapprochement with the Russian Federation that resulted in OPEC+Russia. The new framework proved equally unproductive, and in early March 2020, Saudi Arabia’s Crown Prince Mohammed bin Salman and Russia’s President Vladimir Putin declared a production war, with two of the world’s three biggest energy sources ramping up production to see who could endure the ensuing plummeting prices the longest. Prices crashed much more quickly than anticipated due to the unforeseen depression in demand, resulting from the coronavirus pandemic. As commerce and travel shut down from the global to the local level, there was simply no market for the additional barrels the Saudis and Russians were pumping.

At the April 2020 meeting of OPEC+Russia, the parties failed to resolve the production war, only resolving it later at a virtual G20 energy ministerial, chaired by the Saudi energy minister, Prince Abdulaziz bin Salman Al Saud, and with the participation of the US secretary of energy at the time, Dan Brouillette. As the severity of the COVID-19 crisis became clear, cooler heads prevailed—and the production cuts agreed upon at the G20 continued well into 2021 and have stabilized markets sufficiently to ride out the pandemic.

Enter the US as Major Oil Exporter

The 2020 Saudi–Russia dispute also clarified the US position in global energy markets, which had been quietly evolving for decades, with more accelerated progress over the last four years. America has returned to its long-forgotten role as one of the world’s largest energy producers and exporters. A generation ago, the US would have been a spectator in a production war between Russia and Saudi Arabia, hoping to benefit economically from the plentiful, cheap energy that would result from it. But now, having shifted from being an energy importer to an exporter, America is vulnerable to the negative impact that oversupply could have on our domestic energy industry. Post-pandemic, a top priority should be to recognize that energy security is now a vital national security issue both abroad and at home and to develop a coordinated policy to protect and preserve American energy dominance.

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