How our energy future has been fracked

Where oil and politics intersect with war and foreign policy, that's where you'll find Baker. He was the Secretary of State largely responsible for putting together the coalition against Saddam Hussein in the First Gulf War in 1990–91. You might also recall that Baker was the chief legal representative for George W. Bush in the Florida recount during the U.S. presidential election in 2000.

Mind you, the report isn't Baker's report. But it is from his institute in Houston. As such, I think it gives you a very good idea of how the U.S. energy establishment views shale gas from a strategic and geopolitical perspective. Some of its important conclusions are that shale:

• Combats the long-term potential monopoly power of a "gas OPEC", or a single producer such as Russia, to exercise dominance over large natural gas consumers in Europe or elsewhere.  
• Reduces competition for LNG supplies from the Middle East, thereby moderating prices and spurring greater use of natural gas, an outcome with significant implications for global environmental objectives.  
• Reduces Russia's market share in non-Former Soviet Union Europe from 27 per cent in 2009 to about 13 per cent by 2040, reducing the chances that Moscow can use energy as a tool for political gain.  
• Reduces the future share of world gas supply from Russia, Iran, and Venezuela; without shale discoveries , these nations would have accounted for about 33 per cent of global gas supply in 2040, but with shale, this is reduced to 26 per cent.  
• Reduces the Chinese dependence on Middle East natural gas supplies, lowering the incentives for geopolitical and commercial competition between the two largest [energy] consuming countries and providing both countries with new opportunities to diversify their energy supply.  
• Reduces Iran's ability to tap energy diplomacy as a means to strengthen its regional power or to buttress its nuclear aspirations.

I won't expand on all those points. But in order for you to see how critical shale is becoming to U.S. energy and foreign policy, I will quote a few sections in more detail. The key points are how shale helps the U.S. marginalise what it considers its strategic adversaries. And how the growing importance of natural gas in energy markets erodes the power and influence of oil and oil-producing countries.

On the geopolitical ramifications of the shale gas boom:

Shale gas will play a critical role in diminishing the petro-power of major natural gas producers in the Middle East, Russia, and Venezuela and will be a major factor limiting global dependence on natural gas supplies from the same unstable regions that are currently uncertain sources of the global supply of oil. In this way, shale gas can play a critical role in averting a reinforcement of the political risk we currently face in the global oil market.

Increased competition among world natural gas suppliers due to shale gas developments also reduces the threat that a Gas-OPEC can be formed, and it will trim the petro-power of energy producing countries such as Russia, Iran, and Venezuela to assert themselves using an 'energy' weapon or 'energy diplomacy' to counter US interests abroad. In particular, shale gas' role in global markets will greatly reduce Russia's leverage over Europe, eventually limiting Moscow's share of the non-FSU European market to less than 13 percent, down from its recent peak of 26 percent in 2007.

On the marginalisation of Russia:

The dramatic lessening of Europe's dependence on Russian gas will likely reduce Russia's ability to unduly influence political outcomes. European buyers will have ample alternatives to Russian supplies, thereby reducing Moscow's leverage in the balance of power between Russia and the EU.

Russia has already had to accept lower prices for its natural gas and is now allowing a portion of its sales in Europe to be indexed to sport natural gas markets, or regional market hubs, rather than oil prices. This change in pricing terms signals a major paradigm shift.

On Iran's nuclear program: