VIENNA – As is customary at the start of a new year, imposing statistics and trend forecasts are being trumpeted worldwide. For example, in 2016, China is expected to replace the United States as the world’s largest economy. And, by 2040, India’s population will have reached 1.6 billion, surpassing China’s, which will have stagnated a decade earlier.
Perhaps the most startling projection is that the US will become an energy exporter by 2020, and will become energy self-sufficient 15 years later, owing to the plentiful supply of inexpensive shale gas and the discovery of massive oil reserves everywhere from North Dakota to the Gulf of Mexico. Despite opposition from environmental groups, these reserves will be easier to exploit than those in Europe, because they are largely located in sparsely populated areas.
As a result, energy will be significantly cheaper in the US than in Europe or China for the foreseeable future. Indeed, shale-gas extraction is so economically favorable that even American gas exported to Europe would cost 30% less than what the Russian energy giant Gazprom currently charges.
Cheap energy provides a powerful incentive for energy-intensive industries – from steel and glass to chemicals and pharmaceuticals – to locate in the US. In fact, the decreased cost of manufacturing in America, combined with the country’s business-friendly regulations, strong rule of law, and political stability, will eliminate the competitive advantage that has driven China’s rapid economic growth over the last several decades.