Energy Revolution Reshapes Geopolitical Realities

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Energy Revolution Reshapes Geopolitical Realities

Just a few years ago, the global balance of power, as dictated by the world's energy supply and demand, pointed to a future in which the following scenarios seemed inevitable:

  • The countries of the Middle East would continue to exert disproportionate influence on policymakers in the U.S., as any instability put the oil exports on which the U.S. economy relies at risk.
  • Russia would pursue a policy of aggression toward its neighbors with impunity, because U.S. allies in Europe depended on Russia's oil.
  • China, Japan, and the rest of Asia would feed its voracious appetite for energy by making heavy investments in Africa and other resource-rich countries.
  • U.S. foreign policy would be based on appeasing military dictators around the world who controlled the supply of oil, while being forced to intervene in military conflicts in the Middle East that threatened its oil imports; and at home, domestic energy policy would focus on heavily subsidizing the green energy industry—based on wishful thinking that giving billions of dollars to companies would lead to a future in which solar panels, wind turbines, and electric cars would wean the U.S. economy off its dependence on foreign oil.

Today, the outlook has brightened considerably. Suddenly, oil-rich tyrants in the Middle East and Russia are facing a future in which the commodity they have largely controlled for the past few decades is no longer in short supply.

Top Oil Exporters to the United States, 1973-2012

What has changed? New technologies have unleashed an abundance of energy, through the extraction of shale oil and the capture of natural gas enabled by hydraulic fracturing. The result, as we've discussed in previous issues, is the North American Energy Revolution. While our focus in earlier analyses has been on how this windfall will benefit the U.S. economy, our focus here is on the global impact.

The Center for Strategic & International Studies reports that U.S. shale gas production increased by nearly 900 percent from 2006 to 2013.1 In 2013, U.S. crude oil production increased by nearly 1 million barrels per day, which was one of the largest annual increases in U.S. history, and more than the combined increases in the rest of the world that year.

According to the Annual Energy Outlook 2014, U.S. natural gas production is projected to increase by 56 percent between 2012 and 2040...

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