World Energy Outlook is a dry, statistics-laden annual that rarely generates much heat outside the energy sector. But the 2012 edition, published in November, made international headlines with its prediction that by utilizing new extractive technologies to exploit oil and natural gas reserves once considered inaccessible, the United States would surpass Saudi Arabia as the world’s top oil producer by 2020 and, in partnership with Canada, would become a net oil exporter by 2030. These gains, the International Energy Agency (IEA) observed, would have significant economic and geopolitical implications: “Energy developments in the United States are profound and their effect will be felt well beyond North America—and the energy sector.” By approaching self-sufficiency in the production of oil, the report suggested, the United States will acquire greater clout in international affairs at a time when its rivals—including China—risk losing influence due to a growing reliance on oil imports.
A few weeks after the report’s release, its narrative of American triumphalism was reinforced when the National Intelligence Council (NIC)—an independent arm of the intelligence community that focuses on long-range perils—issued a quadrennial assessment of future international developments, Global Trends 2030: Alternative Worlds. Among the claims that garnered the greatest attention was the prediction that “energy independence is not unrealistic for the US in as short a period as 10–20 years,” and that during the next fifteen to twenty years there will be “a huge growth of the global middle class,” resulting in increased economic innovation along with a clamorous demand for democracy and individual rights—all to the greater advantage of the United States. Resources Futures, produced by a team of analysts at Chatham House in London and published in December 2012, draws similar conclusions. Although a bit less sanguine than the other two agencies about the prospects for satisfying anticipated world resource needs, Chatham House is largely convinced that the extractive industries—private and state-owned—are capable of meeting future energy demand if sufficient investment is directed toward this sector and greater efficiencies are practiced in the consumption of vital materials.
In contrast to the many analysts who have been predicting that global oil output will soon reach a “peak” and then subside (followed, a decade or so later, by a peak in natural gas production), the three assessments see a significant increase in future oil and gas production. Actually, there has been a peak in oil output—but only of easily acquired “conventional” oil, the sort that comes gushing out of the earth in liquid form when a drill strikes a porous oil-bearing formation. But so much additional oil is being acquired from “unconventional” sources—shale rock, Canadian tar sands, Arctic and deep-offshore reserves—that the total supply continues to increase. According to the IEA, global output of conventional crude oil will rise slightly over the next few years before commencing an irreversible decline, while the output of unconventional oil will soar by 238 percent, from 3.9 million to 13.2 million barrels per day.
The picture for natural gas is roughly identical. Only a few years ago, energy analysts were predicting an imminent shortage in North American gas supplies, and there was talk of plans to build multiple facilities for the importation of liquefied natural gas (LNG) from Africa, Russia and the Middle East. Then came the “shale gas revolution,” or the use of hydraulic fracturing (also known as hydro-fracking or, simply, fracking) to extract natural gas from shale formations in Texas, Arkansas, Pennsylvania and neighboring states. The US Department of Energy says that unconventional gas provides about 34 percent of domestic gas output, up from zero a few years ago, and is expected to reach 50 percent by 2040. With so much additional gas entering the market, US producers are again talking about building new LNG facilities—but this time for exporting gas. And according to the Energy Department, as fracking techniques are applied to shale formations elsewhere in the world, unconventional output will boost gas supplies on a global basis, eliminating any risks of future shortages.
From this picture of plenty, the reports derive two major subsidiary conclusions: the United States will rebound as a vigorous industrial power, and the resource and consumer needs of the rapidly expanding global middle class will be successfully met (or at least there is a high likelihood of this happening). The first of these conclusions arises from the fact that US energy companies first mastered the critical technologies—horizontal drilling and hydro-fracking—necessary for extracting oil and natural gas from hard (or “tight”) shale formations. Not only has this given the United States an advantage in exploiting its own unconventional resources, but it has also forced any foreign country hoping to tap black gold from shale to strike a deal with US energy firms in their quest for the necessary technology. China, in particular, seeks to develop its domestic shale resources to offset its ever-growing reliance on imported oil and gas, but finds itself with no choice but to acquire junior partnerships in US and Canadian companies in order to gain experience in using the new extractive technologies.
World energy demand is expected to grow by 35 percent over the next twenty-five years in the principal IEA scenario, jumping from approximately 12.7 billion metric tons of oil equivalent in 2010 to an estimated 17.2 billion tons in 2035. This is a staggering increase; to put it in perspective, the 4.5 billion tons in added annual demand that must somehow be procured is approximately equal to the current energy consumption of the United States and Europe combined. The demand for most of this additional energy will originate in the developing world, to satisfy the needs of the poor and lower-income people who are projected to join the middle class during these years and buy their first cars, computers, air conditioners and other energy-guzzling devices. Of the 4.5 billion additional metric tons needed by 2035, 4.2 billion, or 86 percent, will satisfy the demand of China, India and other nonmembers of the Organization for Economic Cooperation and Development, the club of wealthier industrialized nations.
Finding, developing and delivering all this energy—and the other vital materials needed by today’s increasingly urbanized populations—could prove the most difficult task facing the leaders of large and growing countries in the years ahead. “Up to now less than one billion people have accounted for three-quarters of global consumption; during the next two decades, new and expanded middle classes in the developing world could create as many as two billion additional consumers,” the NIC observes in an especially revealing passage. “Such an explosion will mean a scramble for raw materials and manufactured goods. With greater demand for products, economists worry that the number of bottlenecks will increase markedly and that supply of resources and goods will face at least temporary constraints.”
Were we facing an imminent scarcity of oil, as predicted by many analysts just a few years ago, one implication of the surge in energy demand could be an increase in the competitive struggle over access to dwindling supplies of petroleum, leading, in all likelihood, to crisis and war. But the NIC suggests that thanks to the shale revolution and other innovations, such a prospect is dim. The application of new technologies will permit an increase in oil and gas production, and so the rising expectations of those 2 billion additional consumers—at least for energy—can be met without crisis or conflict.