Shale gas revolution shaking up the world

A revolution is under way in the United States that is predicted to have significant consequences for the global economy and geostrategic affairs.

It is not a political revolt nor is it the development of new weapons.

It is the discovery of large reserves of shale gas and the development of technology to enable its extraction that is underpinning a radical change in the energy market in the United States.

Two technological breakthroughs are driving this shale gas revolution – hydraulic fracturing (fracking) and horizontal drilling.

Gas in the vast shale deposits in the US has been until recently “trapped” in the rock formations.

New drilling techniques have allowed resource companies to drill along shale deposits and then fracture the rock structure, using high pressure water mixed with other chemicals, thus releasing the gas.

This is considered a controversial practice in many countries, including in Australia where it has been used to access coal seam gas reserves.

While there are concerns about fracking in the United States, this has barely slowed development of shale exploration and gas extraction.

The first and most immediate impact is that domestic prices for natural gas have tumbled.

Industrial users of gas in the United States in 2008 were paying an average price of $9.65 per thousand cubic feet of gas, but this has fallen to an average price of $3.67 per thousand cubic feet in 2012.

Gas prices for residential users have fallen from $13.89 in 2008 to an average of $10.54 this year.

According to US government and private sector representatives with whom I have met recently, these price falls have the potential to transform the US economy.