WASHINGTON – Is the “shale gas revolution” now underway in America really such a big deal? You bet it is. Harvard Professor Joseph Nye, former Dean of the School of Government, stated in a WSJ op-ed piece, (Shale Gas is America’s Geopolitical Trump Card, June 9, 2014), that the perfected, made in the USA technologies, (hydraulic fracturing and horizontal drilling), that now enable American energy companies to extract natural gas, and oil from vast rock formations, (in Pennsylvania, Ohio, Texas, Louisiana, Colorado, North Dakota, and other states), almost overnight transformed the US energy outlook.
From depleted resources to super abundance
From quite recent dire projections of dwindling reserves leading to scarcity, and therefore to more and more (expensive) energy imports, in the blink of an eye, we have now entered an era of super abundance:
“Ten years ago —writes Nye— many experts were speaking of “peak oil” –the idea that even reserves in Saudi Arabia had topped off. The US was regarded as increasingly dependent on energy imports and was building terminals to import high-priced liquefied natural gas. Instead, North America is now building terminals to export its low cost LNG, and the continent is expected to be self-sufficient in energy in the 2020s, according to a broad consensus of energy experts. The Energy Department estimates that the country [America] has 25 trillion cubic meters of technically recoverable resources of shale gas, which when combined with other oil-and-gas resources could last for two centuries”. [bold added]
Two hundred years of oil and gas
Got that? The consensus now is that America has about two centuries –that’s two hundred years– of relatively cheap, domestic energy; while only a few years ago experts were predicting the exhaustion of national oil and gas reserves, and therefore the necessity to buy most of the energy we would need to keep the economic engines running from other producers, with profoundly negative balance of payments and energy security consequences.
Of course, energy is only one of the building blocks of a healthy economy. (And we still need to import oil, hopefully most of it from North America: namely Canada and Mexico, and no longer from OPEC).
Still, abundant domestic energy is a very big deal. The private sector-led shale gas revolution is probably the best economic news America has had in the last 20 years.