Earlier this week, Walter Russell Mead noted that domestic oil production is on track to beat Saudi production by the end of the decade, citing to this article from the Financial Times. The FT article states:
The [International Energy Agency's] latest World Energy Outlook said the US could be almost self-sufficient in energy by 2035, marking “a dramatic reversal of the trend seen in most other energy-importing countries”. It said the US would overtake Russia as the largest gas producer by 2015.The article notes, however, that Saudi Arabia will probably remain the top oil exporter. FT also notes the following:
The resurgence in US oil and gas production, it said, was spurring economic activity “with less expensive gas and electricity prices giving [US] industry a competitive edge”. Last week, a Germany industry lobby group warned that US companies are enjoying a rising advantage in energy costs.
New extraction techniques – most notably hydraulic fracturing, or fracking, and horizontal drilling – have unlocked huge hydrocarbon resources previously thought unrecoverable. The boom, which started in natural gas, has switched to “tight oil” in places such as North Dakota’s Bakken Shale and Eagle Ford in South Texas.
If realised, the IEA’s prediction could have significant implications for global commodity markets and the broader geopolitics of energy. Some analysts have wondered whether an energy-independent US would still guard the world’s critical sea lanes such as the Strait of Hormuz in two decades’ time – and whether China, whose reliance on Middle East crude imports was growing, would replace it.After discussion that higher oil production may not necessarily result in lower prices at the fuel pump, Mead writes:
The losers, perhaps, will be the green movement. The brown revolution will create high-paying jobs for Americans and reduce our reliance on faraway sources of oil from unreliable partners, like Venezuela and Nigeria and as more states benefit from the energy boom, and more investment goes to industries that depend on reliable domestic sources, energy friendly policies will have more political friends in the American political system.(See also this story at the National Post concerning the IEA report and possible consequences).
Another catch: higher domestic production is going to create substantial tax revenues for local, state and federal levels of government. Politicians are going to have a vested interest in keeping that money coming in, just as the interest groups who benefit from government spending won’t want environmentalists messing with their revenue source.
So, it was with interest that I read the following story today from ABC News:
Drillers in Utah and Colorado are poking into a massive shale deposit trying to find a way to unlock oil reserves that are so vast they would swamp OPEC.
A recent report by the U.S. Government Accountability Office estimated that if half of the oil bound up in the rock of the Green River Formation could be recovered it would be "equal to the entire world's proven oil reserves."
Both the GAO and private industry estimate the amount of oil recoverable to be 3 trillion barrels.
"In the past 100 years — in all of human history -- we have consumed 1 trillion barrels of oil. There are several times that much here," said Roger Day, vice president for operations for American Shale Oil (AMSO).
The Green River drilling is beginning as shale mining is booming in the U.S. and a report by the International Energy Agency predicts that the U.S. will become the world's largest oil producer by 2020. That flood of oil can have major implications for the U.S. economy as well as the country's foreign policy which has been based on a growing scarcity of oil.