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Saudi kingdom still roiling against rise of Pa. fracking

Pennsylvanians should be aware of the Keystone State’s continuing influence on global energy markets and the political battleground still unfolding in the Middle East because of shale oil and gas fracking in the United States.

OPEC, led by its chief producer Saudi Arabia, recently gave up on a desperate, yearlong attempt to flood global markets with crude oil and suppress energy prices worldwide. OPEC’s plan was to lower the price of energy enough to make shale gas and oil unprofitable — it’s more expensive to produce by fracking in the Marcellus and Utica Shale regions that it is to get oil and gas from the OPEC nations’ conventional wells. They figured that with a lower market price, they could still make a profit, although a smaller profit, when their U.S. competitors could not.

The gambit backfired. The Saudi kingdom, which relies heavily on oil to finance its government, drew down on its cash reserves to fill the gap in petroleum income. Saudi consumers paid dearly in 2016 and economic conditions continue to deteriorate there. King Salman bin Abdul-Aziz Al Saud fired his labor minister earlier this month, and the kingdom, which routinely imports foreign workers to supplement its labor force, now has an unemployment rate soaring above 12 percent.

Add to that the growing regional influence of OPEC partner Iran, which has defied the latest agreement to cut exports. In fact, OPEC agreed to let Iran increase its exports while Saudi Arabia must bear the bulk of net reductions — a decision the Iranians are reportedly celebrating.

Ultimately, analysts say, it is far from clear that OPEC’s latest move will significantly change the slump in energy prices.

If you need more evidence of the growing importance of energy diplomacy, look no further than President-elect Trump’s choice for Secretary of State. Sources within the Trump transition team say Exxon Mobil CEO Rex Tillerson will get the job over experienced political and diplomatc figures like Rudi Giuliani, Mitt Romney, Gen. David Petraeus or John Bolton. Exxon is not involved in shale gas, but energy fields are interrelated.

Pennsylvania’s non-conventional gas wells currently are producing about 430 billion cubic feet of natural gas every month, according to state data. This year for the first time, the generation of electricity from gas-fired power plants exceeded electricity from coal-fired plants as gas-fired plants go online and coal-fired plants are mothballed.

The Saudi kingdom’s fate is not completely tied to petroleum, even though sometimes it appears to be. There are other woes: the United States Congress accused it of complicity in the 9/11 attacks, and now there is a U.S. president-elect who will be unlike any of his predecessors. Its involvement with a war in neighboring Yemen has proved costly both in terms of resources and relations with regional Arab states.

An ambitious program, Saudi Vision 2030, sets a goal of independence from petroleum income by the year 2030. That seems like an entirely attainable goal — for Pennsylvania and the rest of the United States, maybe, but it seems to be slipping away from Saudi Arabia.

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