The Baker Institute has released a report entitled ‘Shale Gas and U.S. National Security’, which outlines the positive geopolitical consequences that shale gas could bring for the US and the wider geopolitical changes it could incur.
US balance of trade
The increase in shale production will lead to a drop in the price of natural gas as more producers enter the field, and this will prevent the development of a ‘Gas OPEC’ cartel forming which could have control over global gas prices. Increased shale gas production could also dramatically reduce US dependence on expensive LNG imports and help reduce the country’s trading deficit. If sufficient reserves are tapped, America could even become a net exporter of natural gas and convert it’s idle LNG import terminals into liquefaction and export terminals.
The report also outline how increasing shale gas production could also put a stop to ‘Energy diplomacy’ with resource rich nations such as Russia, Iran and Venezuela asserting themselves through their greater bargaining power as holders of essential energy supplies. Shale gas could lower Russia’s share of the non-FSU European gas market down to 13% from a peak of 27% in 2007, this would significantly reduce Russian influence in Europe. Europe’s dependence on piped Russian gas has made it difficult for Europe to forcefully oppose Russia in foreign affairs, such as the invasion of Georgia, for fear of reprisals through withheld gas supplies.
Increased shale production will also reduce Iran’s power to drive a wedge between countries trying to enforce trade sanctions against it. As the country has significant energy resources, it can use these as a bargaining chip to drive a wedge into the international community. By reducing the need to tap Iran’s natural gas, it takes away the country’s only bargaining chip and allows time for political change to occur. If the country is able to cement itself as a major natural gas supplier it will mean other countrys’ will have a vested interest in maintaining the regime.
The shift to natural gas will also significantly reduce global carbon emissions, this is a driving force behind the adoption of LNG in may countries around the globe. If shale gas is exploited across the globe and in the US then this transition can be made painlessly and without excessive price increases or giving undue influence to major holders of natural gas reserves.