A new age of abundant and cheap energy supplies is redrawing the world's geopolitical landscape, weakening and potentially threatening the legitimacy of some governments while enhancing the power of others.
Surging U.S. oil production enabled America and its allies to impose tough sanctions on Iran without having to worry much about the loss of imports from the Middle Eastern nation. Russia, meanwhile, faces what President Vladimir Putin called a possibly "catastrophic" slump in prices for its oil as its economy is battered by U.S. and European sanctions.
"A new era of lower prices is being ushered in" by the U.S. shale oil and gas revolution, said Ed Morse, global head of commodities research for Citigroup Inc. "Undoubtedly some of the geopolitical changes will be momentous."
They certainly were a quarter of a century ago. Plunging oil prices in the latter half of the 1980s helped pave the way for the breakup of the Soviet Union by robbing it of revenue it needed to survive. The depressed market also may have influenced Iraqi leader Saddam Hussein's decision to invade fellow producer Kuwait in 1990.
Russia again looks likely to suffer from the fallout in oil markets, along with Iran and Venezuela, while the U.S. and China come out ahead.
Benchmark oil prices in New York have dropped more than 30 percent during the last five months to around $75 a barrel as U.S. crude production reached the highest in more than three decades.
Saudi Arabia and Kuwait have begun what energy economist Philip Verleger calls a "price war of necessity" in response, aimed at protecting their market share and forcing producers in the U.S. and elsewhere to reduce output.
Leonardo Maugeri, a former executive at Italian oil company Eni SpA who is now at Harvard, said the market has entered a "gray zone." A terrorist attack on oil fields in the volatile Middle East could send prices back up. So could a cutback by OPEC or a revival of global demand, though Maugeri says neither is likely.
