WASHINGTON, DC – The biggest innovation in energy so far this century has been the development of shale gas and the associated resource known as “tight oil.” Shale energy ranks at the top not only because of its abundance in the United States, but also because of its profound global impact – as events in 2014 will continue to demonstrate.
America’s shale gas and tight oil are already changing global energy markets and reducing both Europe’s competitiveness vis-à-vis the US and China’s overall manufacturing competitiveness. They are also bringing shifts in global politics. Indeed, how shale energy may change America’s role in the Middle East is becoming a hot topic in Washington, DC, and in the Middle East itself.
This “unconventional revolution” in oil and gas did not come quickly. Hydraulic fracturing – known as “fracking” – has been around since 1947, and initial efforts to adapt it to dense shale began in Texas in the early 1980’s. But it was not until the late 1990’s and early 2000’s that the specific type of fracturing for shale, combined with horizontal drilling, was perfected. And it was not until 2008 that its impact on the US energy supply became notable.
Since then, the industry has developed fast, with shale gas currently accounting for 44% of total US natural-gas production. Given abundant supply, US gas prices have fallen to a third of those in Europe, while Asia pays five times as much. Tight oil, produced with the same technology as shale gas, is boosting US oil production as well, with output up 56% since 2008 – an increase that, in absolute terms, is larger than the total output of each of eight of the 12 OPEC countries. Indeed, the International Energy Agency predicts that in the next few years the US will overtake Saudi Arabia and Russia to become the world’s largest oil producer.