The US shale revolution

So far we have discussed demand-side changes mostly surge in energy consumption in China and India. Let’s now turn to discuss supply-side changes. The biggest supply side changes is unconventional oil and gas revolution in North America, particularly in the United states. In the past, most energy supply was coming from either the Middle East or Russia. In the case of Middle East, Saudi Arabia was the leading energy oil producer, and LNG was mostly produced from Qatar. Russia, on the other hand, was a big player in natural gas production. America has risen as No.1 oil and gas producer, due to the success of unconventional oil and gas production. What is unconventional oil and gas production?

Unconventional oil and gas production is oil and gas trapped 3,000m under the ground in the shale rocks. America has succeeded in discovering and extracting these shale oil and gas in 2009. Due to the success of shale oil and gas, America has risen as No.1 gas oil and gas producer. Because of that, oil and gas production from the Middle East and Russia is facing a lot of problems. They used to enjoy market and geopolitical power derived from monopoly supply positions. US oil production is currently at historically high levels, and the country’s import dependence has dropped below 50% for the first time in more than a decade.

The resurgence in US production is also being paralleled by increasing production from near neighbors, most notably Canada and Brazil. As a result of Canada’s oil sands and Brazil’s pre-salt oil reserves, the two could export as much as 5 million barrels of oil per day. This will likely limit the amount of oil imported from the Middle East to the US, which, historically, has been a major rationale for the US military and strategic presence in the Middle East region.