While Britain Dithers, The World Is Fracking
Shale gas is not just about affordable energy and growth. It’s about reducing dependence on the Middle East
Campanilismo, meaning horizons constrained by the bell tower or campanile, is a term that captures the parochialism that has long inhibited Italian national consciousness. More crudely we have the saying from Lucca: “It is better to have a dead body in your house than a person from [nearby] Pisa at the door.”
We urgently need a word like that — “Balcombismo” perhaps — to describe the self-righteous caravanserai that has migrated from besmirching the environs of St Paul’s Cathedral to the anti-hydraulic fracturing campaign in the West Sussex village.
Experts have carefully picked apart the protesters’ more hysterical fears, in a regulatory context that is far tighter and uniform than in American states where fracking is booming.
With consumer bills already hurting five million households on modest incomes and as the power sector strives to bear the burden of unaffordable EU-UK policies that dogmatically favour heavily subsidised wind and solar, reasonable people — uninhibited by Balcombismo — need to focus on Britain’s looming energy crisis. A research paper by Liberum Capital’s Peter Atherton describes an imminent “perfect storm” — an affordability and supply crisis, sometime between 2014 and 2017. The lights might not go out but consumers could face 40 per cent increases in their energy bills.
So far, the Conservatives have not made the case for shale especially forcefully, encumbered as they are by their mésalliance with the pro-renewables Liberal Democrats, and with a BBC of green-tinged Cassandras crying “woe” in the wings. The challenge for our political leaders is to spell out the longer-term global consequences of the shale revolution.
Argentina, Australia, Canada, China and Mexico all have prodigious reserves of shale but it is America that has pioneered its exploitation. Within the lifetimes of most readers, the US is likely to become independent of energy imports, as symbolised by talk of “Saudi Texas”, and will become an exporter of liquefied natural gas. In addition to lower household energy costs, the US will benefit from jobs “coming home” to re-energised chemical, iron and steel plants and downstream manufacturing industries, not to mention lower transport costs once vehicles run on compressed natural gas. This won’t just reduce carbon emissions. Abundant natural gas means, among other things, cheaper fertilisers, which will benefit the world’s starving in ways that the Balcombe protesters have never imagined.
As it happens, America’s main global competitor has even greater technically recoverable reserves of shale gas, though they are a couple of thousand metres deeper and at present Beijing seems to prefer coal. Nonetheless, PetroChina and CNOOC have already invested in the US shale revolution, so as to have a good look at the sophisticated technologies involved. For China, shale is a way of decelerating the environmental pollution that comes from promiscuously burning fossil fuels, although with only 6 per cent of the world’s water and 20 per cent of its population, China will have to find ways around fracking’s undoubted prodigality with this precious resource.
Since the 1970s the developed world has shuddered whenever there has been a Middle East crisis, the latest involving fears of how an attack on Iran’s nuclear facilities would impact the Straits of Hormuz, the M4 bottleneck of the ocean-going tanker world. The biggest impact of shale will be on existing oil and gas producers, which is probably why one jittery Gulf state recently sponsored the trailers for Hollywood’s latest example of anti-fracking alarmism — starring Matt Damon — and why the subject gets such negative treatment in the Russian media.
A recent report from Nomura argues that US imports of Middle Eastern crude oil will fall to zero in the not so distant future. As the US exchanges intervention by necessity for intervention by choice in the greater Middle East, China (and India) will have to decide how far they want to assume the burdens of a major naval presence in the Gulf. Without a US strategic umbrella, it will be up to them to keep the oil and gas flowing.