Shale Gas Revolution to Bring About Big Changes in U.S. Economy

COMMENTARY | American politicians have a conundrum involving energy policy. It is a problem, so called, that was quite unexpected just a year or so ago. Simply put, how much natural gas should the United States export?

Thanks to the shale gas revolution, which has involved the development of technology called "fracking" which consists of injecting fluid under pressure to open holes in natural gas bearing shale formations to release the product, the United States is awash in natural gas. For the first time since the Truman administration, the U.S. is actually a net exporter of fossil fuels.

If one would imagine that this is a boon rather than a problem, the Washington Post wishes to disabuse one of that notion. Even though the objections are being raised by Rep. Ed Markey, a liberal Democrat from Massachusetts, they are not entirely frivolous.

The more natural gas the United States exports, the higher the price for the product will be domestically. This means that the opportunity to lower energy costs using a clean burning fuel would be lost, with all of the economic and environmental implications one can imagine.

On the other hand, more natural gas on the world market would compete with other forms of energy, such as oil and coal, causing a downward push in the prices of those commodities. As a bonus, the American balance of trade will improve much to the benefit of the country.

However a piece in IPS News suggests that the United States is not the only country that can get in on the shale gas revolution. Countries not known to be big fossil fuel producers, such as China, Argentina, Australia, South Africa, Poland, France, Chile, Sweden, Paraguay, Pakistan and India all have large reserves of shale gas and have every incentive to exploit them. Eventually there will be far fewer countries that will be wholly dependent on imports of fossil fuels to keep their economies going. Therefore the market for American natural gas will only diminish over time.

The big losers, of course, will be oil exporting states, especially in the Persian Gulf area, which have gotten rich beyond the dreams of avarice feeding the energy hunger of the western world. Their loss will certainly not cause many people to shed tears.

The irony is that the Obama administration came into office with bold promises to transform the United States into a renewable energy economy. Much of that effort has been a bust, and in cases like Solyndra, a scandal. America's energy economy is about to change. But as usual the government has little to do with it.

Source: Should the U.S. export its natural gas? A debate flares, Brad Plumer, The Washington Post, Jan 4, 2012

Shale Gas Turns the Tables on Petroleum Powers, H umberto Márquez, IPS News, Jan 3, 2012