If Shale 2.0 output keeps prices low, Russia would be a
big loser. Moscow has used oil revenue to finance aggressive
foreign intervention from Ukraine to Syria. The only solution
is to continue cooperating with Saudi Arabia on keeping pro-
duction low—not something the oligarchs relish.
With shale surging, U.S. imports of Saudi oil plunged to a
30-year low last year. The turnabout makes China and Japan
far more dependent than the U.S. on the Middle East. It’s now
possible for the U.S. to argue that other countries should help
shoulder the burden of policing the shipping lanes leading to
Middle Eastern and North African oil exporters.
Yet not all traffic lights are green for the U.S. It’s not
immune from the ups and downs of the world market.
When the price rises because of, say, political upheaval in
the Middle East, it doesn’t matter where you are and how
much you pump. The price rises in America, too.
There’s another problem: Shale 2.0 could hurt refiners.
Shale oil is too good. For years, refiners spent billions of dol-
lars on special equipment to process the dense, high-sulphur,
low-quality crudes coming from Mexico, Venezuela, Canada,
and Saudi Arabia. The quality of shale oil is so high that ityields little diesel, the fuel that powers manufacturing.
Such limitations may be mere speed bumps. But U.S. dom-
inance is far from a panacea. It won’t reverse climate change.
It won’t lessen the political influence of fossil-fuel producers
in Washington. Nor will it completely neutralize the political
influence of erratic petrostates.
With demand rising despite the emergence of renewables
and the development of electric vehicles, shale may struggle
to keep pace with global consumption. There’s a chance the
world will witness that rarest of market loop-de-loops—high
oil prices as well as rising U.S. production.
Saudi Arabia and Russia could then remain formidable
obstacles to U.S. energy independence. They would be crow-
ing from the top of the hill even as they keep a wary eye on
America’s shale drillers.
These are troubles that would have been an embar-
rassment of riches for Americans who had to wait in line to
fill up in the 1970s, when the U.S. determining its own energy
future was just a dream. Any celebration over this accom-
plishment ignores the evidence that such dependence on
fossil fuels is no independence at all. —With Joe Carroll12
VIEW
VIEW Bloomberg Businessweek January 29, 2018More Assaults
On Obamacare
○Trumpplanstoattackthecore
principleofhealthinsuranceThe year ahead looks to be dangerous
for health-care security in the U.S., as
the Trump administration continues to
sabotage the law Congress couldn’t re-
peal. New proposals would let many
more healthy Americans drop their
Obamacare coverage—raising costs for
the unhealthy and risks for everyone,
sick or well.
First, the administration intends
to expand and deregulate association
health plans. Under current law, such
plans, sold to trade and professional
associations, must cover “essential
health benefits” such as hospitalization,
maternity care, and prescription drugs.
Trump wants to increase enrollment in
these plans and end the restriction onbenefits. This would let insurers create
cheap, weak-coverage plans and mar-
ket them to people who expect no big
health-care expenses. Second, the ad-
ministration wants the duration of
unregulated short-term policies to grow
from three months to as long as a year,
letting some healthy people pay smaller
premiums for minimal insurance. Third,
Trump would allow employers to offer
workers tax-favored “health reimburse-
ment” accounts that aren’t paired with
health insurance. This would also draw
healthy people out of the market.
Why is it wrong to let healthy people
opt out? Partly because, as experience
before the Affordable Care Act proved,
weak-coverage plans often serve their
buyers badly. Insurers misled consum-
ers about the benefits, leaving them with
astronomical bills to pay. But the more
fundamental problem is that opting
out defeats the basic principle of insur-
ance, to spread risk. Premiums paid by
everyone—young and old, healthy and
sick—collectively pay for health care.
People in good health today gain the se-
curity of knowing they’ll be taken careof when the need arises. Keeping this
system running well requires that the
healthy and not-so-healthy all pay into
the same pool and that their insurance
covers any care that may be needed.
Trump is attacking this core idea.
The split-market problem will be com-
pounded in 2019 by the loss of the
“individual mandate” penalty for going
without insurance, a change Congress
enacted in its tax bill. Facing no pen-
alty, some healthy people will gamble
on going without coverage, keeping
their premiums out of the pool.
State governments should do what
they can to push back—for instance,
by creating their own individual man-
dates, as Massachusetts did long ago
and Maryland is proposing to do now.
They ought also to place limits on
association health plans and short-term
plans. Unfortunately, it’s safe to assume
that not all states will do so. Thanks to
Trump and a Congress that’s failing
the country, many more Americans
will soon be left where they were be-
fore the ACA—unable to afford decent
health care. To read Justin Fox on the benefits
of delaying retirement and Megan
McArdle on Netflix’s spending
problem, go to Bloombergview.com