Lawrence Solomon: Shale Means Security
Global-warming legislation has emerged as the single biggest threat to the West’s energy security and the single biggest boon to most of the West’s geopolitical foes.
To fight jihadists, foreign policy hawks have long promoted global warming legislation: If carbon taxes and conservation programs can get us off Middle Eastern oil, the hawks reasoned, oil prices will drop as demand drops and money for terrorist attacks will dry up. Out came global warming legislation touting its benefit for national security, such as the Climate Security Act of 2008, which promised deep cuts to America’s dependence on Middle East oil by 2050.
Those hawks should reconsider. Global-warming legislation has emerged as the single biggest threat to the West’s energy security and the single biggest boon to most of the West’s geopolitical foes. The game changers are shale oil. The U.S. has so much of it that Citigroup, in a report released earlier this month, states that in five years the U.S. could eliminate all oil imports from the Middle East and other hostile suppliers and become a net energy exporter. The U.S. has already halved its oil imports from 2006 levels.
Other expert bodies are equally bullish about the prospects of shale oil. The International Energy Agency forecasts that by 2017 the U.S. will overtake both Russia and Saudi Arabia to become the world’s biggest oil producer, and that by 2035 it will be able to eliminate almost all oil imports, including from Canada. PricewaterhouseCoopers (PwC) believes that U.S. shale oil production could reach four million barrels per day by 2035, more than triple the U.S. government’s official estimates. This has been an overachieving industry, it notes, with a torrid 26% per annum growth rate to date and an estimated 33 billion barrels in the ground, up dramatically from the 2007 estimate of just four billion barrels.
The global prospects — estimates of recoverable shale oil reserves have climbed to as much as 1.5 trillion barrels — change the game again. PwC believes that the gush of oil that the globe will be seeing will dramatically lower oil prices, possibly by US$50 a barrel, boosting the global economy by as much as US$2.7-trillion a year by 2035. The biggest winners of this shale-oil fallout are India and Japan, whose GDP could rise by an extra 7%, followed by the U.S. and the eurozone, which could see extra 5% rises.
But there are also losers. Russia and the Middle East oil exporters “could see a significant worsening of their trade balances by around 4% to 10% of GDP,” PwC says. According to Citigroup, with shale oil added to the world’s existing conventional and tar sands supplies, oil prices could drop below the break-even levels that many countries need. Russia may not be able to balance its budget. The picture for “Venezuela is pretty bleak.” Some countries risk becoming “failed states.”
Put another way, the democracies all win, the dictatorships and authoritarian states mostly lose.