One of my longstanding concerns about U.S. energy policy is that the Organization of Petroleum Exporting Countries (OPEC) has long exerted a strong influence over our economic destiny. This became apparent to many for the first time in 1973 when members of OPEC initiated an oil embargo against the United States and U.S. allies. At that time, OPEC’s share of global oil production had just exceeded 50%, and the group was very much in a position to stall Western economies by denying oil exports to countries that had come to rely on them. It of course did that, and the price of oil quadrupled over just a couple of years, sending much of the world into a deep recession.

But the other thing the embargo did was spur changes in the energy policies of countries that were dependent on oil imports. When Gerald Ford became president in August 1974, addressing the U.S. loss of energy independence was high on his list of priorities. In his 1975 State of the Union address, he said: “Our growing dependence upon foreign sources of petroleum has been adding to our vulnerability for years and years, and we did nothing to prepare ourselves for such an event as the embargo of 1973.”

Ford proposed a number of initiatives designed to reduce growing dependence on foreign oil. He promoted expanded use of coal and nuclear power, development of synthetic fuels and shale oil resources, and proposed tax credits to help homeowners with the cost of installing insulation. He set goals to reduce oil imports by 1 million barrels per day (bpd) by the end of 1975 and by 2 million bpd by the end of 1977.

In December 1975, Congress established the Strategic Petroleum Reserve (SPR) under the  Energy Policy and Conservation Act (EPCA). The law was designed “to reduce the impact of severe energy supply interruptions” such as the OPEC embargo. EPCA also extended the Emergency Petroleum Allocation Act of 1973 — which had established price controls on petroleum — and for the first time set federal standards for fuel efficiency in new cars.

Some of the policies from Ford’s tenure have had a lasting impact. Fuel efficiency in cars initially rose rapidly following implementation of the Corporate Average Fuel Economy (CAFE) standards in 1978. A 2002 study by the National Academy of Sciences concluded that motor vehicle fuel usage was 14% lower in 2002 than it would have been in the absence of fuel efficiency standards.

Over the past couple of years OPEC’s share has again been on the decline, but so far the decline has been relatively modest. Nevertheless, OPEC has indicated that it considers continued shale oil production a real long-term threat to its market share. Last week, when OPEC met it surprised many by declining to make production cuts in order to shore up prices. Production cuts were favored by Venezuela, Nigeria, and Iran, but Saudi Arabia still calls the shots as the largest OPEC producer (with 31% of OPEC production in 2013).

Saudi Arabia is taking the long view, in the belief that while low prices will cause economic pain for OPEC in the short term, over the longer term they will rebalance supply and demand at the expense of the U.S. shale producers most sensitive to market signals.

Recall that not too long ago Saudi Arabia was quite happy with $100/bbl oil, and in fact needs oil prices to be nearly that high to balance its budget. Other countries, like Venezuela and Russia, need oil prices to be at least $100/bbl to balance their budgets. But Saudi Arabia is hoping that a little short-term pain will pay off the in long run.

In the short term, the losers will be countries that depend on oil exports for revenue. These are primarily the OPEC countries, Russia, and even Canada. U.S. shale oil producers will also lose revenue, and some could conceivably go under or be taken over if the price remains low for long enough.

Winners will be those dependent on oil imports. The U.S. economy is arguably the largest beneficiary, as the U.S. is still the largest oil importer in the world. China isn’t far behind. This drop in oil prices — while painful to many oil producers — is a net short-term benefit to the U.S. and Chinese economies. Whether it will be a long-term benefit remains to be seen. Saudi Arabia is betting that it won’t be. But if history is any guide, U.S. energy policy may shift yet again to ensure that Saudi Arabia isn’t back in the driver’s seat, calling the shots on world oil prices.

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)

Portfolio Update

No Deal Joy for Hated WPX  

Some energy securities have started to show faint signs of life after making the latest lows in the wake of the bearish OPEC meeting. But not WPX Energy (WPX), which remains firmly entrenched at a record low despite Wednesday’s announcement of a deal to sell 46,700 net acres of mostly undeveloped Marcellus gas turf in northeast Pennsylvania to Southwestern Energy (NYSE: SWN) for $300 million.

That looks like a decent price for a position WPX had no interest in developing further, and in the deal the company also sheds an annual commitment of $24 million for firm transportation capacity. The deal is expected to close in the first quarter of 2015.

WPX is also shopping its remaining Marcellus position in southwestern Pennsylvania. The company has no interest in developing the Marcellus because it is garnering superior returns on crude drilling in the Williston Basin in North Dakota and in New Mexico’s San Juan basin, enjoying strong cash flow growth that is very likely to outlast the current weakness in crude prices.

With more than half of next year’s crude production hedged at nearly $95 a barrel and oil output growing fast, it’s only a matter of time before the share price revives. WPX is the #7 Best Buy below $21.