There is an energy revolution under way in the United States. Booming oil and natural gas production is transforming our economic outlook, ushering newfound wealth to our rural areas and providing high-paying jobs for middle-class workers across the country. This revolution is largely responsible for the resurrection of entire industries — like steel and manufacturing — that once defined our national character. While this is good news, it may be just the beginning, as this resurgence could reshape the geopolitical world.
Many credible experts agree. For example, according to the International Energy Agency, the global energy map “is being redrawn by the resurgence in oil and gas production in the United States.” The report also notes that by 2020, the United States will displace Saudi Arabia as the world’s largest oil producer.
The energy agency also projects by 2035 the United States may reach self-sufficiency in terms of oil production. In other words, as Consumer Energy Alliance noted last year, we may meet our energy needs within our lifetimes. The last time that happened was before the end of World War II, when exhausted domestic supplies and growing demand required the United States to secure oil from outside its borders for the first time.
What geopolitical ramifications could all of this bring?
For starters, according to the International Energy Agency, the United States’ long-standing trade deficit should improve drastically, as oil imports represented two-thirds of that deficit in 2011. Analysts note this could help spur a trade surplus within the next decade. While not a panacea, expanded oil and natural gas development could help balance the nation’s overall deficit, one of our largest weaknesses and one of the strongest headwinds facing the U.S. consumer and our economic confidence.
A report conducted by the Harvard Kennedy School of Government noted other changes that could be realized. Specifically, it found America’s newfound self-sufficiency in natural gas is “causing shifts in patterns of trade and is leading other countries in Europe and Asia to explore their own shale gas potential.” The report also indicated this is “putting pressure on long-standing arrangements and may lead to the weakening of Russia’s dominance in the European gas market.”
Russia has already agreed to re-examine the price of limited long-term contracts, and European nations are now developing their shale basins. A report from the James A Baker Institute for Public Policy predicted this could erode Russia’s market share of European natural gas supplies from 27 percent to 13 percent, thereby further reducing Russia’s leverage over our European allies.
The potential for change doesn’t end in Europe. According to the IEA’s 2011 World Energy Outlook, every major region of the world has recoverable gas resources equal to at least 75 years of supply at current consumption rates. The U.S. and China, two of the world’s largest oil and gas importers, have the world’s largest shale reserves.
The Baker Institute report noted that U.S. shale gas will help diminish the petro-power of major natural gas producers and will be a “major factor” in limiting global dependence on the Middle East, Russia and Venezuela, as well as other unstable regions. The report states, “The petro-power of Russia, Venezuela and Iran is faltering on the back of plentiful American natural gas supply.”
Moreover, the institute notes this newfound energy abundance can significantly reduce Iran’s ability to use its energy resources to counter U.S. diplomatic efforts.
Nations developing their shale basins provide a more geographically diverse array of energy sources, which will increase the quality of life for many, while reducing choke points and the likelihood of supply disruptions.
Shale is not only transforming the U.S. economy, it holds the real promise of weakening regimes hostile to the United States. This could result in a more predictable economic environment for the U.S. consumer and two of the world’s most heavily traded commodities. It could also help reverse the energy politics of the last 40 years and nudge U.S. foreign policy away from being beholden to foreign oil.
Regardless of what happens internationally, one thing is certain: The United States’ oil and natural gas revolution is improving our domestic economy by providing millions of jobs for American workers, increasing wealth in communities and revitalizing our manufacturing base. This bodes well for a strong and growing U.S. economy moving forward, so long as we don’t inadvertently derail our own success.
David Holt is president of the Consumer Energy Alliance.