You are very likely to know that the US has developed technologies which enable them to access natural gas reserves trapped in shale rock formations. This is known as the ’US shale gas revolution’, and its potential impacts on the global markets is causing great debate amongst many.
On the domestic front, net US imports of oil and gas will fall next year to their lowest level since 1987. By 2014, it is predicted that America will rely on the rest of the world to supply less than a third of crude, gas and other fuels (compared to nearly two-thirds in 2005). If these forecasts are correct, the US is moving towards a state of energy independence.
Furthermore, reduced US gas prices resulting from the surge in domestic gas supplies, may lead to an increase in US manufacturing, with many chemicals manufacturers for example, who were at one point leaving the US, intending to expand their US chemicals production and take advantage of the more favourable situation of (comparatively) cheaper gas.
Aside from domestic implications, the US’s expansion into shale gas as one of the world’s largest economies and one of the great global energy importers arguably will have sturdier repercussions on the rest of the world.
Take Canada for example. With 100 per cent of Canada’s current natural gas exports going to the US, and net natural gas exports to the US forecasted to contract by less than one-third of what Canada was exporting to the US as recently as 2007, Canada may have to begin to diversify its energy supplies, either by investing and developing in their own domestic markets, or by expanding abroad.
Australia is another example of a country which has been dependent on gas exports to the US, and may need to begin to diversify its own markets. Given the geographic location of both countries, Asia is a market which both could look to expand in. However, the Australians may wait to see what Canada does, for if Canada did pursue more of a domestic energy policy, it would reduce competition for the Asian markets. Moreover, Australia could learn from Canada’s domestic energy expansion model and use it as their own.
In Europe, it is still unclear what the nature of its own shale gas opportunities look like, but if the ‘US Shale gas revolution’ was to spread across the pond, Russian markets, who export vast quantities of gas to Europe, could be affected as markets in the Middle East may be (regarding their exports to the US).
A further point made about the Middle East by many, is that if the region is to become less economically vital to the US, then this begs the question what impacts this will have on the geopolitical importance of the region.
What is clear, is that the US is far more advanced than its economic competitors in Europe, Russia and China, having developed the technologies to source shale reserves (which it continues to develop at a rapid rate). It will be interesting to see how the imminent use of shale gas will impact global markets.