OPEC’s Loss Is Poland’s Gain as Shale Boom Tames Inflation

North America’s shale industry may be the swing producer in the oil market, but it’s becoming a dominant factor across the Atlantic for eastern Europe’s biggest importer of energy.

OPEC’s loss of its pricing power, combined with cost reductions and advances in extraction technologies, have resulted in an “important and irreversible change” for Poland’s $475 billion economy, according to central bank Governor Adam Glapinski, who says shale production is effectively capping oil at about $50 a barrel. 

Oil is the second-largest energy source in Poland, with most of it shipped from Russia. It also relies on imports for two-thirds of its natural gas needs. To diversify its energy supply away from Russia, Poland received the first shipment of liquefied natural gas from the U.S. in June.

Poland, which needs imports to meet 97 percent of its oil consumption, has long been vulnerable to commodity shocks. But inflation has stabilized this year after a rebound that started in late 2016 led to the world’s biggest six-month acceleration in price growth. 

Energy affects inflation by way of housing and transport costs, which together account for a third of Poland’s consumer-price basket. Annual inflation surprised by slowing for a second time this year to a four-month low of 1.9 percent in May.

Energy prices “will be a factor in depressing inflation,” Kropiwnicki said. “Despite all efforts of OPEC, prices of energy resources won’t return to the level from last year thanks to new technologies in oil and natural gas extraction.”

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