On Friday, Energy Information Administration (EIA) released an interesting statement. In their estimation, the United States will pass Saudi Arabia and Russia to become the leading exporter of crude oil in the next twelve months. The country will be producing more than 10 million barrels of crude oil every day.

This is an important development. In the past decades, the United States has had a complex relationship with Middle Eastern countries and Russia. It depended on their crude oil. These countries, including the OPEC cartel, controlled every little thing about crude oil and the U.S had no say.

For years, these countries have held the United States hostage. As a large buyer, the country sent them trillions of dollars every year. Then, these countries would use the funds to fund terrorist organizations, which would return attack the United States. Russia would use the funds to fund online programs used to harm the country.

The evolution of the United States as a leading oil producer is associated to technology. The country has been at the forefront in the hydraulic fracturing technology. Using this technology, oil drillers drill a vertical hole. After reaching the desired depth, they then dig horizontally and pump in water and chemicals in high pressure. By doing this, they are able to reach crude oil, which is held in deep within the earth’s crust. Traditional vertical-only drilling could not reach this oil.

The U.S response to this report will be very important. A suggestion that has been floated is to tax all foreign oil imports and remove taxes from oil U.S-based drillers. This is now possible because the country has leverage against its ‘strange bedfellows’.

I believe that the news may be bearish for the crude oil market. This is because U.S-based producers have reduced the cost of drilling so much that a price above $40 is good for them. Remember, the U.S is not a member of OPEC and it is not obligated to play by any rules. In addition, the country’s economy is very diversified. OPEC countries are not like that. Most, like Saudi Arabia and Nigeria, depend almost exclusively on crude oil.

In the short term, markets will expect a sharp correction as investors will likely interpret and trade the current news.