How the Energy Revolution Will Reshuffle the Global Economy

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How the Energy Revolution Will Reshuffle the Global Economy

It's both a reality and cliché to say, "The world economy runs on energy." An almost unimaginable increase in GDP per capita over the past 250 years has largely resulted from the abundance of cheap energy that we've learned to extract and utilize with ever-greater efficiency. Starting with biomass and hydropower, civilization moved on to coal, oil, natural gas, and nuclear fission.

Since the 1970s, the economic and geopolitical order has been defined by surpluses of economically accessible petroleum and natural gas in the Persian Gulf and the former Soviet Union. Newly developed conventional resources under North America and the North Sea were seen as short-lived opportunities.

Most importantly, planners assumed that we lived in a so-called "peak-oil" world, in which total global oil and gas production would peak and then decline, beginning in the early decades of the 21st century.

But that's not what's happening at all. Instead, we're seeing an energy-driven reshuffling of the economic and geopolitical order for the first time since the early '70s.

This reshuffling of the global economy will result from the spread of America's hydraulic fracking know-how and innovation, benefiting countries worldwide.

Before we get to that, let's take a look at how this revolutionary technology is already changing the energy landscape in the U.S., and why other countries are taking note and hoping to leverage this innovative breakthrough.

Fracking entails pumping pressurized water, mixed with sand and chemicals, into underground wells. This pressure boosts the extraction of oil and gas.

This technique has been around since the 1950s, but in the '80s it was coupled with horizontal drilling to further increase production, particularly from shale formations that contain trapped oil and gas.1 However, large-scale production of shale gas did not begin until around 2000 in north-central Texas. But soon, the outstanding results prompted the technique to be adopted in other parts of the country, including the resource-rich Bakken Shale in North Dakota.

As fracking and horizontal drilling spread across the U.S., dry shale gas production increased from 300 billion cubic feet in 2000 to 9.6 trillion cubic feet in 2012. This new level now constitutes 40 percent of U...

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