Advances in surveying and drilling technology have brought the world to the brink of another energy bonanza. It is already underway in the United States and Canada in the form of a shale-gas boom so profuse that natural-gas prices have crashed, falling almost 90 percent over the past seven years.
Elsewhere, security gains are opening up previously off-limits oil patches. In April, Iraq’s oil output finally eclipsed 1990 levels. As reported by the Washington Post, over the next five to seven years Iraq might be able to supply almost half of the growth in worldwide oil demand. In Latin America, Colombia has become the fourth-largest supplier of oil to the United States, ahead of Ecuador, which is an OPEC member.
This hints at what may be in the offing, from places as far-flung as Brazil and the Arctic, the Canary Islands and the Falklands.
Unlike previous energy booms, this one appears to have a democratic orientation. Not only are things getting started in North America and Europe, but the surest losers from the changes afoot will be the petrostates that are habituated to using oil for geopolitical influence, including Iran and Saudi Arabia. Beyond having a weaker grip on “the energy weapon,” these countries are going to have to negotiate higher OPEC output quotas with Iraq in the coming years, ultimately reducing their own sway within the energy cartel.
These factors are leading to some rosy projections for broad-based development, environmental concerns notwithstanding. Already Brazilian president Dilma Rousseff has promised that a large share of revenue from the country’s offshore oil reserves will go to education and other social programs.
And in a recent essay for Time, U-2 front man and developmental-economics student Bono wrote: “In many ways, Africa is to this century what North America was to the 19th. It has 60% of the world's undeveloped arable land and vast reserves of coal, oil and minerals, together with enormous renewable-energy resources.” Few people expect much to change in Chad or Equatorial Guinea anytime soon, but increased transparency is improving the odds of public benefit in Ghana, Mozambique and other places where oil has been found recently.
Unfortunately, while the number of countries set to partake in the boom ensures that outcomes will vary widely, several countries look to have their chances at the bonanza curtailed because of government scheming.
Argentina is perhaps the most striking example. In April, President Cristina Fernandez de Kirchner nationalized the part of the oil company YPF, then owned by the Spanish energy firm Repsol. In so doing, Kirchner expressed her desire to exert greater control over Argentina’s energy resources and, most assuredly, use YPF to offset Argentina’s growing fuel-import bill. But with U.S. and European investment sure to decrease as a result of the move, in the long term Argentina will lack the technology and expertise needed to tap its shale-gas reserves, estimated to be the world’s third largest.
A Chinese company was reportedly in talks with Repsol to buy its share of YPF when the nationalization was announced, and there are rumors that Kirchner may still want to sell the company. This suggests a broad misreading of how China does business. In the past decade, the prevailing belief was that China would bite at any opportunity to acquire oil and gas. In fact, Hugo Chavez had to agree to pay the shipping costs to sell oil to China, and China’s energy dealings with Iran (so far as outsiders can tell) have dropped precipitously as sanctions against the Islamic Republic deepen.
Now China has even less reason to prop up troubled friends. After a disappointing solo attempt to recover shale gas three years ago, Chinese companies have turned to Western partners to jumpstart production in the country, which is thought to possess the world’s largest shale-gas reserves.
Moreover, China’s recent energy moves indicate a desire to supplement fuel imports from Central Asia and Russia with oil and gas from countries like Australia and Canada, which are stable and more likely to have reliable export infrastructure than, say, Argentina. So while China’s ongoing growth is certainly key to the global energy equation, this is chiefly because the country’s immense energy demands create a price floor that assures costly and complex gas projects are worth large initial investments, and not because Beijing is ready to shower money on a country anytime a boom is at hand.
But despite the evident pitfalls, in recent months Brazil and Russia have made moves similar to those made in Argentina, harassing Western energy firms in order to get a stronger grip on energy projects, even as these countries issue calls for more foreign investment.