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Research Report


Copyright Date: Nov. 1, 2014
Published by: Atlantic Council
Pages: 20
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Table of Contents

  1. (pp. 1-1)

    Still in its early stages, the shale revolution—the combination of computer-aided horizontal drilling and hydraulic fracturing known as “fracking”—is already having a profound multidimensional impact. It is redrawing the United States and global energy landscape, reshaping world energy markets, and beginning to alter global geopolitics. Shale holds promise to substantially enhance US global economic competitiveness and US foreign policy leverage globally. But it is worth recalling just how recent a phenomenon this disruptive technology is. There are also continued questions about environmental impact that may limit or even undermine the future of shale

    In 2008, just five years...

  2. (pp. 2-6)

    As the world’s largest producer of oil and gas hydrocarbons, the United States is projected to surpass Saudi Arabia as the world’s number one oil producer by 2017 and become a net exporter by 2030.⁴ Oil production is now 8.7 mb/d, the highest since 1994.⁵ Natural gas production is 72 billion cubic feet per day (bcf/d), 40 percent of which is from shale.⁶

    There are currently ample natural gas reserves to meet current US demand for a hundred years. Although the shale gas phenomenon, like the Internet, is now taken for granted, the rapidity of its progress, since roughly 2008,...

  3. (pp. 7-7)

    The strategic implications of the shale revolution begin at home, strengthening US resilience and bolstering the US economy and the environment in important ways. The falling price of US natural gas to roughly $4-$5 b/cf has led to a shift from coal-fired to gas-fired power plants. Prior to the shale boom, coal accounted for 50 percent of US electricity, but plants have increasingly shifted to gas. Depending on price fluctuations, remaining coal-fired plants constitute roughly 39 percent of US electricity production while gas-fired ones provide about 32 percent.29

    This has boosted US economic competitiveness and by extension, US comprehensive national...

  4. (pp. 8-9)

    The shale revolution already has had an important foreign policy impact. It is doubtful whether it would have been possible to impose oil export sanctions on Iran without oil prices skyrocketing and destabilizing a fragile global economy absent the surge in US oil production. More broadly, oil production disruptions that followed the Arab Awakening would almost certainly have driven prices significantly higher were it not for the boom in US oil production.

    Importantly, the shale gas boom has also freed up LNG that the United States was projected to import from markets in Europe and Asia. This has increased gas...

  5. (pp. 10-10)

    For major Middle East oil and gas exporters, as well as Russia, US shale gas and tight oil may alter the economics of gas development and of oil market dynamics. In the case of Iran, the US shale revolution will complicate its efforts to develop its large gas reserves.44 Growing US oil production, along with increased non-OPEC oil production elsewhere, will diminish OPEC’s role in determining prices over time and perhaps the traditional Saudi role as the swing producer.

    The extent to which the shale revolution is a disruptive force in the Middle East is unclear. To the degree that...

  6. (pp. 11-11)

    There are clearly more questions than answers about the strategic consequences of the shale revolution. Although much attention has been focused on the economic and environmental impact of the shale revolution, comparatively little thought has been given to the national security consequences. The US energy situation has been transformed with ramifications rippling across the US economy. The shale revolution opens up a range of new choices for US foreign policy. Certainly, the growing move toward self-sufficiency gives the United States more flexibility in its foreign policy choices.

    The new energy realities the United States has created could lead US foreign...