How our energy future has been fracked

The U.S. energy/national security establishment believes shale gas has the potential to transform the world's energy and geopolitical landscapes.

This, of course, is the essential point I've tried to make in Revolution in the Desert, my report on how shale gas could affect Australia and benefit Australian investors.

But in all the share market excitement of the last few weeks – and there's been a lot of action on the ground in this new industry – it's easy to forget just how large and world-changing this story is. I was reminded of that this week.

The full geopolitical implications of the shale revolution are on display in a document published by the James A. Baker III Institute for Public Policy at Rice University. The document is called Shale Gas and U.S. National Security. You can click on that link and peruse it at your leisure. Or you can read the condensed version I've taken the liberty of compiling below.

I think you'll find, as I suspected, the emergence of shale gas is the single most important geopolitical energy event since the discovery of oil in commercial quantities in Saudi Arabia in 1938.

America's Most Powerful Energy Insider

The Baker Institute report claims, among other things, that shale's rise could mean the end of OPEC...reduce global political risk thanks to increased energy supply diversity...marginalise strategic adversaries of the United States, such as Russia, Venezuela, and Iran...mitigate climate change...and even reduce America's deficits by lowering its reliance on energy imports.

I'm not providing you with the American perspective on shale because I'm an American myself. But the way the U.S. energy establishment views shale is telling.

Even if shale gas doesn't develop in the rest of the world like the Americans expect, it will most certainly develop in America. And that will fundamentally change the world's energy markets.

Make no mistake; this report is the view of the U.S. energy establishment. For one, Rice University is right on Main Street in Houston, Texas. I drove past the university when I was in Houston in May for the Offshore Technology Conference. Houston is the energy capital of America, and Rice is its most prestigious university.

The Baker Institute itself is named after one of the ultimate energy and political insiders of the last 50 years in American politics: James A. Baker III. Baker was White House Chief of Staff for presidents Ronald Regan and George HW Bush. He served as Treasury Secretary for the first Bush.