A report released last week by the Baker Institute at Rice University, “Shale Gas and U.S. National Security,” focused on the foreign policy benefits of this domestically produced fuel. The authors undertook the study in light of the tremendous growth in discoveries of natural gas from shale in North America and the technological innovations that made it possible. There exists as much as 2,000 trillion cubic feet of salvageable natural gas in North America alone, or roughly 100 years’ worth of gas consumption worth for the United States.
This new U.S. natural resources wealth has far-reaching implications for foreign policy. In a world in which energy is playing a central role in the economies of all nations, both developing and developed, those blessed with energy abundance have long held sway in world affairs, not always for the better. Think of Russia, Iran, and Saudi Arabia.
The discovery of vast shale gas resources in North America allows for domestically produced and environmentally clean energy alternatives not just for the U.S. but for our allies as well.
Europe benefits from U.S. gas wealth. The major exporter of natural gas to Europe has long been Russia, which managed to dominate natural gas consumers there. The authors of the Baker Institute’s study believe that shale gas discoveries in North America have the potential to reduce Russia’s (non-former Soviet Union) European natural gas market share from 27 percent in 2009 to about 13 percent in 2040 and reduce Moscow’s ability to use energy policy as a tool for political gains. This is because the U.S. is not going to buy as much liquefied natural gas (LNG) as was originally thought on the world market, and Europeans may benefit from the glut as supplies from Qatar, Nigeria, Algeria, and West Africa become cheaper.
This is in addition to the large shale gas deposits in European countries such as Poland, Romania, Ukraine, and others that are still in the process of being discovered. For example, The U.S. Energy Information Administration said in April that Poland had some 5.3 billion cubic meters of shale gas deposits.
Availability of cheap LNG in Europe is forcing Gazprom, the Russian state-owned natural gas behemoth, to reduce prices and partially decouple gas pricing mechanisms from the very high crude oil prices. This makes electricity prices in Europe grow slower than in the past.
Though Russian gas exports continue to grow, their destination is switching to China and Japan. A Sino–Russian deal for the supply of up to 68 billion cubic meters of Siberian gas a year is in the works, with only the price still being haggled over. As Russia’s ability to unduly influence political outcomes in Europe may decrease, its bond with China grows ever stronger.
A more diverse energy supply benefits consumers and limits the current dominant exporters in the energy market. According to the Baker Institute report, this enhances U.S. interests by “buttressing Europe’s abilities to resist Russian interference in European affairs and help countries in Central and Eastern Europe, including the Balkans, assert greater foreign policy independence from Moscow.”
In essence, providing more diverse domestic energy sources for ourselves and others mitigates Russia’s ability to exert political power through its energy weapon. Thus it appears that the discovery of large shale gas deposits in North America has some powerful positive repercussions worldwide.