How our energy future has been fracked

Given global market economics under a full development of shale scenario, the commercial window for Iran to export large amounts of natural gas is likely to be closed for an additional 20 years, making it easier for the United States to achieve buy-in for continued economic sanctions against Iran.

Shale gas development lowers the chances that Iran can use its energy resources to drive a wedge in the international coalition against it.By delaying the need for Iranian gas, the United States buys time to find a better solution to the Iranian nuclear problem and leaves open the possibility that political change will take place in Iran before its influence as a major global natural gas supplier grows.

In addition, the long delay in the commerciality of Iranian gas means that Tehran will have trouble moving forward with the development of pipelines to India or Pakistan until at least the mid-2020's, thus reducing a potential source of tension between the United States and India.

The rise in U.S. shale gas supplies thereby leads to significant delays in Iran's ability to tap natural gas resources as a means of energy diplomacy, giving Tehran less leverage to use in the short run to counter U.S. diplomatic efforts at containment.

On the global implications of shale gas:

Shale gas, by displacement, not only has spatial impacts on the global gas market, but also temporal impacts. More specifically, shale gas delays for well over a decade the world's reliance on regions that have historically been volatile and greatly reduces the chance of any individual or group of producers exercising decisive monopoly powers.

The emergence of shale will not only limit the market influence of Russia and Iran but it also limits the near-term possibility of a successful natural gas cartel by increasing the elasticity of supply of natural gas in countries outside the Gas Exporting Countries Forum (GECF), thereby reducing the monopoly power that can be exerted by GECF countries. Thus, shale gas yields security benefits more broadly than just to the United States.

On the world's changing energy mix:

Natural gas stands to play a positive role in the global energy mix, making it easier to shift away from more polluting, higher carbon-intensity fuels and increasing the near-term options to improve energy security and handle the challenge of climate change. The ample geologic endowment of shale gas in North America and potentially elsewhere around the globe means that natural gas prices will likely remain affordable and that the high level of supply insecurity currently facing world oil supplies could be eased by a shift to greater use of natural gas without fear of increasing the power of large natural gas resources holders such as Russia, Iran, and Venezuela.

 

On the big strategic winners from the emergence of shale:

"The recent developments around shale in the United States are also having another, potential market structuring altering, effect. Revelations about the existence of technically – and possibly commercially – viable shale gas resources are also occurring in other regions around the world, with shale gas potential being discussed in Europe, China, India, Australia, and elsewhere. To be sure, the enormity of global shale gas potential will have significant geopolitical ramifications and exert a powerful influence on US energy and foreign policy.

You can see that the U.S. perspective on world affairs has been dramatically altered by the emergence of shale gas. This is precisely the shift in focus that I outlined in Revolution in the Desert. It's what is diminishing the importance of the U.S.–Saudi relationship. And it's the driving force behind the new "energy superhighway" between Saudi Arabia and China.

In fact, what's telling about the Baker report is how little Saudi Arabia is mentioned at all. And how little attention China gets. It's as if the U.S. energy establishment believes shale is a geopolitical game-changer that has revolutionised the world's energy markets... and changed the strategic picture for good. I agree with this, of course, which is why I wrote Revolution in the Desert in the first place.