ON-Lion Letter

According to a February column by Mark P. Mills in Forbes, "Secretary of Defense Ashton Carter ruffled feathers ... when, in a February 2nd speech at the Economic Club of Washington D.C., he demoted ISIS and terrorism, to the bottom of a list of key threats to America's national security.  At the top of the list of 'five evolving challenges'?  Russia.

"Right now, though, odds are that Vladimir Putin is more worried about what oilmen like Harold Hamm are thinking than what's on the SecDef's mind," Mills continues.  "Hamm, founder and CEO of Continental Resources, is one of the more outspoken amongst the multitude of shale pioneers who are collectively responsible for the global oil glut -- and the consequent price collapse."

Mills is a senior fellow of the Center for Energy Policy and the Environment (CEPE) at the Manhattan Institute in New York City and chief executive officer of the Digital Power Group.  The Lynde and Harry Bradley Foundation in Milwaukee substantially supports the Manhattan Institute in general and its CEPE in particular.

"Hamm, referencing the fact that American shale producers have in the past half-dozen years nearly doubled America's oil output," recently said "We can double it again," Mills notes.  "If Hamm is correct, then the shale fields alone -- never mind the rest of America’s onshore and offshore production -- would be producing more oil than Russia, and the world markets would again be in oversupply.

"That oil is a vital global commodity is without dispute," Mills writes.  "It is central to global trade and transportation with simply no viable alternative available at any price any time in the foreseeable future.  The biggest wildcard in geopolitics right now?  The future price of a barrel.  That will determine not just how fast and how much more oil will come from America's shale, but also the future profits for every global producer.  And of course profits from oil sales fuel the domestic and extra-territorial ambitions of the world's petrostates.

"For Russia, almost three-fourths of all export revenues and over half its national budget comes from selling oil & gas," he says.  "The problem is that, according to the World Bank, Russia needs oil at $100 per barrel to balance its domestic budget and fund its military and foreign ambitions.  It's expensive to buy modern weapons, including the missiles Russia has deployed across the NATO frontier.  And it's expensive to meddle in foreign nations whether by deploying troops in the Ukraine and Syria, or funneling 'gray' money to bad actors from Africa to South America.

"The key question for nation-state oil exporters like Russia:  What price will cause the Harold Hamms of America to rush back into drilling and unleash a Shale 2.0 boom?"

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