Impact of US oil boom: Global reordering

Anthony Schillings connects a pump to load water into his truck at a Heckmann Water Resources treatment plant that separates oil sediment and water mi!ed during the hydraulic fracturing process near "arthage #e!as$

With reliance on foreign oil waning the balance of power is shifting around the globe with une!pected winners and losers and a renewal of US power$
%&'I"( "I#) *or the past +, years
U$S$ presidents ha-e launched distant wars allied with autocratic sheikhs and dispatched na-al fleets to protect sea lanes all for the imperati-e of keeping foreign oil spigots flowing$ #hat imperati-e has now subsided$ Rather suddenly the center of gra-ity of global energy production has swung toward the Americas as shale oil and gas fields in .orth /akota and #e!as hum with acti-ity$ America is mo-ing to the fore as the world0s largest producer of petroleum and natural gas$ #hat change will reorder the globe in ways large and small$ U$S$ e!perts say it will prolong the United States0 position as the predominant global superpower$ Arab nations that shook the world with the 1234 oil embargo almost certainly will be weakened$ Russia will find its power ebb as &uropean nations find alternate suppliers for natural gas$ .ew energy technologies will reorder the scales of global winners and losers$ 5#here are not many times in history where you can see the balance of power shift 5 said /a-id 6$ Goldwyn founder of Goldwyn Global Strategies an energy intelligence consultancy in Washington$ 5We are going to see that$5 "oinciding with America0s shale oil boom Goldwyn said are cutting7edge technologies that allow new parts of the globe to tap into uncon-entional energy resources including deep offshore natural gas beds$ 8laces like "yprus in the eastern %editerranean %o9ambi:ue in Africa and "olombia in South America hold promise with energy reser-es$ 5We0re really seeing the small 0d0 democrati9ation of access to energy in more countries and more places 5 Goldwyn said$ #here are skeptics of course whose doubts range from distrust of the geological forecasts to analysts who say an en-ironmental disaster could derail the shale oil and gas boom ;ust as the <,11 *ukushima nuclear disaster in =apan sapped global enthusiasm for nuclear energy$ 5#he implications of the U$S$ shale re-olution are so great for its economy and security that you don0t want to kill it with stupidity 5 said Robert A$ %anning an energy e!pert at the Atlantic "ouncil a public policy think tank on trans7Atlantic issues$ He ad-ocates more federal regulation on the process of e!tracting energy from hydraulically fractured shale formations a process known as 5fracking 5 to ensure that en-ironmental or other setbacks do not occur$ 5If we find out that it0s causing earth:uakes or something else bad happens you want to pre-ent that stuff 5 he said$ &-en doubters howe-er are beginning to think the fracking boom may ha-e long7range implications$ "hief among them is the (rgani9ation of 8etroleum &!porting "ountries the energy cartel that for four decades was the arbiter of world energy supplies and prices$ =ust this month (8&" re-ersed its pre-ious -iew of the 5marginal5 nature of the

U$S$ fracking boom acknowledging that energy supplies created by new technologies could cut sharply into the cartel0s market$ #hroughout Africa oil7producing states e!press alarm about the drop7off in their e!ports to the United States$ #he flow of .igerian crude to U$S$ shores hit 1$4 million barrels per day in <,,3 but by August it had fallen to 33 ,,, barrels daily$ African oil producers now ship more oil to &urope and "hina but many there are concerned by the loss of a dependable customer$ Ira: whose oil deposits were once thought likely to benefit U$S$ oil companies has found that "hinese not U$S$ companies are the ones interested in its oil bounty$ American oil companies would rather drill at home$ 8erhaps what is most alarming to some is that the shale re-olution is likely to perpetuate U$S$ dominance not ;ust in geopolitics but in the energy industry itself$ While many countries also ha-e massi-e shale reser-es > "hina is the most notable but Algeria Argentina and %e!ico are others > none is thought likely to be able to take ad-antage of those deposits easily certainly not with the e!plosi-e growth seen in the United States$ %any factors gi-e the United States a head start in e!ploiting energy locked in shale including its access to cutting7 edge technology and risk capital clear pri-ate resource ownership and huge numbers of drilling rigs most of them capable of the difficult hori9ontal drilling re:uired in fracking$

0%(S# /RI66&/ S#A#& I. #H& W(R6/0: 5I0m -ery skeptical about the ability of any

other country to replicate the drilling intensity5 of the United States said 6eonardo %augeri a former e!ecuti-e at the world0s si!th largest oil company Italy7based &ni who is at the ?elfer "enter for Science and International Affairs at Har-ard0s @ennedy School of Go-ernment$ "ompanies in the United States own nearly A, percent of all acti-e drilling rigs in the world %augeri said a key condition for the continuous drilling needed for fracking$ 5#e!as is the most drilled state in the world 5 %augeri said$ 5#o gi-e you an order of magnitude the number of wells drilled in #e!as compared to Saudi Arabia is 1 ,,, to one$5 #he ability of the United States to dominate the e!traction of shale deposits at home raises another :uestion troubling to some: Will the United States become less interested in the global military role it plays nowB 5(ne thing this may do is untangle the obsessi-eness about %iddle &ast oil this whole idea that we ha-e to somehow protect these sea routes at all costs 5 said %ark "linton #hurber associate director of the 8rogram on &nergy and Sustainable /e-elopment at Stanford Uni-ersity$ *orty years ago supertankers sailing through the Strait of Hormu9 at the entrance to the 8ersian Gulf carried more than half the world0s crude$ U$S$7allied petro states there grew rich buying U$S$ armaments and fighter ;et s:uadrons$ U$S$ strategic interests led it to launch Gulf wars in 1221 and <,,4$ #he greatest symbol of U$S$ presence and power in the region is the .a-y0s Cth *leet docked in the tiny sheikdom of ?ahrain$ "omprising some 4, ships and <, ,,, personnel the fleet protects the 8ersian Gulf and the Red and Arabian seas$ #oday U$S$ ta!payers foot the bill for .a-y ships that largely protect supertankers headed to Asia$ "hina o-ertook the United States as the largest importer of 8ersian Gulf oil two years ago$ #hat trend will surge and 5it0s going to raise all new :uestions 5 said Amy %yers =affe an e!pert on global energy production at the Uni-ersity of "alifornia /a-is$

5)ou ha-e the "hinese and other Asians free riding on a U$S$ security presence I0m not sure that0s sustainable 5 said %anning of the Atlantic "ouncil$

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As Asian populations rise and economies grow nations there should be recruited to help patrol sea lanes said "harles @$ &binger director of the &nergy Security Initiati-e at the ?rookings Institution a Washington think tank$ 5I can en-isage that as both India and "hina become maritime powers that we ha-e ;oint operations 5 &binger said$ 56et0s say that we are e-en thrown out of our base in ?ahrainD I could see a rotational basis between the three great powers "hina India and the U$S$5 Some e!perts argue that the United States should not disengage from the 8ersian Gulf because U$S$ interests there go far beyond energy supplies$ #he region is -ital to efforts to contain nuclear proliferation and religious e!tremism the protection of Israel remains a central U$S$ interest and while the importance of %iddle &ast oil may be on the decline for the United States any disruption there would send world prices skyrocketing 7 harming economies in Asia that are -ital U$S$ markets$ 5#he United States is so wo-en into the world economy that we need that energy flowing to Asia 5 said Rachel ?ronson -ice president of studies at the "hicago "ouncil on Global Affairs and an e!pert on U$S$7Saudi relations$ Saudi Arabia Washington0s most important strategic Arab partner has sharply di-erged from the (bama administration this year o-er whether to arm Syrian rebels and how to confront Iran0s nuclear program$ #he Saudis still share strategic interests with the United States and continue to play a large global energy role for their ability to increase oil production so prices do not spike e-en as (8&" the once7formidable cartel has seen its production remain stagnant for +, years$ #he 1<7nation cartel now supplies 42$E percent of world crude and li:uid fuels production down from C+ percent in 1234 according to the &nergy Information Administration the statistics branch of the U$S$ &nergy /epartment$ 5(8&"0s going to be on the defensi-e 5 said =affe of U" /a-is$ *or the short and medium term oil giants like Saudi Arabia and @uwait may sur-i-e unscathed as they look to Asia sending as much as 3, percent of their oil there$ Smaller oil producers in .orth Africa and the %iddle &ast howe-er may encounter 5power struggles or uphea-al5 as they face declining re-enue according to a report in *ebruary from "itigroup the global financial concern$ (-er the longer term the outlook may be brighter$ #he 8aris7based International &nergy Agency forecast in a report this month that rising global demand would allow the %iddle &ast to recapture its role as a key source of oil by the mid7<,<,s primarily to meet surging demand in Asia while &urope and the United States reap benefits of impro-ed energy efficiency$ %ost U$S$ e!perts concur that a big loser from the growth of the U$S$ shale industry will be Russia which has locked in &astern and Western &urope as clients for its natural gas le-eraging the reliance on its supplies for political gain$ #he Russian share of the &uropean Union0s natural gas imports is e!pected to drop howe-er from the current 4+ percent to below 1C percent o-er the ne!t 1, to 1C years according to some analyses replaced by supplies of li:uefied natural gas from the United States$ 5Russia is in big big trouble 5 said &binger of ?rookings noting that %oscow is losing re-enue by subsidi9ing domestic consumption e-en as natural gas prices are under assault slowly decoupling from decades of linkage to crude oil prices$ "hina with its massi-e appetite for energy and pressing need to cut down on coal7fired power generation that contributes to pollution has

compelling reasons to e!tract more energy 7 if only it can corral the know7how and drilling muscle to do so$ According to a =une estimate by the U$S$ &nergy Information Administration "hina has the world0s largest reco-erable shale gas reser-es nearly double of those in the United States$ Its shale oil reser-es are the world0s third largest after Russia and the United States the &IA said$ ?ut whether "hina will e!ploit those finds is uncertain$ #he country0s three ma;or oil companies currently see greater profits for themsel-es working o-erseas rather than at home$ And foreign companies are reluctant to work in "hina because of restricti-e contracts and other conditions$ "hinese analysts ha-e wrung their hands o-er the impact of the U$S$ shale re-olution with one hea-yweight pundit declaring that it will remold the world$ 5#his writer as a diplomat who has o-er +, years of e!perience in the %iddle &ast belie-es that the U$S$ initiated shale gas re-olution will not only change the global landscape of energy distribution but will also change the world0s geopolitical layout$ #he United States will take a more dominant position in global energy distribution 5 wrote Wu Sike a senior statesman who used to be "hina0s en-oy to the %iddle &ast and is now member of a key foreign affairs committee$ %iddle &ast turmoil howe-er won0t end and e-entually Wu writes 5#he United States will become less and less reliant on %iddle &astern oil until this reliance finally ends$5 Wu sees fracking as ha-ing 5an insurmountable impact on the %iddle &ast the global economy and the world0s geopolitical map$5 Some U$S$ analysts generally agree and say the result of the U$S$ shale re-olution will be a strengthened economy and a turn7around morale in a nation that some felt was on the decline$ 5As the United States0 imports shrink and we are e!porting less dollars abroad to pay for oil and gas then our trade deficit will narrow 5 said =affe$ 5We won0t be as badly disad-antaged compared to "hina anymore$ And their economy is going to shrink some because they0re not going to be leading in petrochemicals anymore because some of the industry $$$ is coming back to the United States$5 #he *ebruary "itigroup report titled 5&nergy <,<,: Independence /ay 5 put it more simply$ 5#he United States should see its role in the world as a singular superpower enhanced and prolonged 5 the report says$