Hydrofracking and the world balance of power

Two countries without shale gas: Russia and Iran

Two countries without shale gas reserves: Russia and Iran

All my life I’ve held that if you have a finite resource, such as oil or natural gas, and you use it at an ever-increasing rate, someday you will run out.   As a matter of logic, this is an irrefutable truth.  But all my life, the oil and gas industry has been rendering this truth irrelevant, by discovering new sources of oil and gas and new ways to get at it.

The latest discovery is the hydraulic fracturing technique for extracting natural gas, which, together with oil drilling in the warming Arctic, is creating a new energy era.

Because of hydrofracking, Americans are burning less coal and oil, and more clean-burning natural gas.  Carbon emissions are at their lowest level in nearly 20 years.   Increased use of renewable energy and better conservation methods contribute to the improvement, but hydrofracking is a key factor.

Because of hydrofracking, the world balance of power is changing in favor of the United States.   The world has less need to import oil from the Persian Gulf.  Europe has less need to import gas from the Russian Federation.   Here’s how Der Spiegel, the German newsmagazine, sees things.

The future of the American energy supply was looking grim until recently. With its own resources waning, the United States was dependent on Arab oil sheiks and erratic dictators. Rising energy costs were hitting a vital nerve in the country’s industrial sector.

hydro_truck_laBut the situation has fundamentally changed since American drilling experts began using a method called “fracking,” with which oil and gas molecules can be extracted from dense shale rock formations.  The International Energy Agency (IEA) estimates that the United States will replace Russia as the world’s largest producer of natural gas in only two years.  The Americans could also become the world’s top petroleum producers by 2017.

Low natural gas prices — the price of natural gas in the United States is only a quarter of what it was in 2008 — could fuel a comeback of American industry. *** ***  

The outlines of a changed world order are already emerging in the simulations of geo-strategists.  They show that the United States will benefit the most from the development of shale gas and oil resources.  A study by Germany’s foreign intelligence agency, the BND, concludes that Washington’s discretionary power in foreign and security policy will increase substantially as a result of the country’s new energy riches.

According to the BND study, the political threat potential of oil producers like Iran will decline. Optimists assume that, in about 15 years, the United States will no longer have to send any aircraft carriers to the Persian Gulf to guarantee that oil tankers can pass unhindered through the Strait of Hormuz, still the most important energy bottleneck in the world.

The Russians could be on the losing end of the stick.   The power of President Vladimir Putin is based primarily on oil and gas revenues.  If energy prices decline in the long term, bringing down Russian revenues from the energy sector, Putin’s grip on power could begin to falter.  The Americans’ sudden oil and gas riches are also not very good news for authoritarian regimes in the Middle East.

I’m of course glad that natural gas prices are falling, and that I am paying less to heat my house than I did a few years ago.  I acknowledge that hydrofracking has contributed to my well-being.  I don’t think it would benefit anyone if I were to switch to fuel oil, or if it would be possible to return to the coal furnaces of my boyhood.

My friend Michael thinks cheap gas from hydrofracking will tide us over during the transition to renewable energy.  I doubt it will work this way.  So long as the price of the supposed transitional energy supply is falling, there will be little economic incentive to make the transition.  That will have to wait until the price of fossil fuels starts to rise again.

I know that I can’t predict the future.  I won’t try to predict how long the hydrofracking boom will last.  I would be happy of the supply of cheap gas lasts my lifetime.  Since I’m 76, it just might.  But I don’t think it will last the lifetime of my niece and nephew, or of their infants and toddlers.  I read a report on The Oil Drum site that hydrofracked gas wells are being depleted more quickly than expected, and I link to that report at the end of this post.

I still think the smart thing for we upstate New Yorkers to do is to hold back on hydrofracking until the price of natural gas starts going up again.   The question is not whether hydrofracking is a good thing overall or not, but rather whether adding our little increment to the world supply will be worth the cost.

Click on Full Throttle Ahead: US Tips Global Power Scales With Fracking for the full Der Spiegel article.

Click on Future Bakken Production and Hydrofracking for the full article on The Oil Drum.

Click on U.S. Carbon Emissions Fall to Lowest Level Since 1994 for a report on the benefit of clean-burning natural gas.

Click on Gazprom Gas Giant Is Running Into Trouble and Stepping on the Gas: New Drilling Technologies Shake Up Global Market for more from Der Spiegel on natural gas and world power.

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