The shale revolution hit America and the world with such speed and suddenness that it surprised almost everyone—investors, businessmen, economists and politicians. Soon the implications of this dramatic development seeped into the national consciousness and spread optimism that the United States could ride it to a wave of prosperity. And the new techniques for extracting "unconventional" oil and gas from shale rock, which America possesses in such abundance, do indeed pose prospects for an economic boom.
They also pose prospects for changes in the defense posture of many nations. Anything of value that a nation possesses must be protected, and that includes its capacity to produce energy. America's leaders and defense chiefs will have to recognize and respond to the new strategic imperatives of shale, just as their potential adversaries undoubtedly will. Together, these new imperatives will have repercussions for sea-lane protection, domestic security, the importance of water, and international competition for diminishing foreign markets.
While these may not be major challenges to Washington yet, they will grow in significance as the shale revolution, currently in its relative infancy, continues to expand. As Maria van der Hoeven, executive director of the International Energy Agency (IEA), puts it, “The global oil map will be redrawn over the next five years.” The revolution is the product of new, cost-effective methods of drilling to extract natural gas trapped in shale rock. In the United States, which has taken the lead in such development, this has brought a glut of cheap energy onto the domestic market. By 2015, the IEA estimates, the United States will overtake Russia as the world's biggest gas producer and by 2035 will become “all but (energy) self-sufficient.” Shale oil also can be extracted from shale rock, and the IEA estimates that within a decade the United States will overtake Saudi Arabia as the world's biggest oil producer. As recently as October 2005, America was importing more than 13 million barrels of oil every day, around two-thirds of its consumption.
Exactly where and when other shale producers will emerge is difficult to tell. Other countries, notably European states, possess large deposits of shale rock but lack the key ingredients of America's own energy revolution. Western Europe's shale deposits, for example, have a higher clay content that makes them much harder to exploit, while Eastern Europe lags behind the United States in technology. Its governments also may not be able to subsidize their energy companies with the generous tax breaks and incentives that have fuelled America's shale boom. But China could eventually become a major player, since it is moving fast to exploit its very large resources of shale gas: some leading analysts think that, by 2020, domestic production could significantly reduce its demand for imported gas. Other countries with high hopes of shale production include Argentina, Poland, Ukraine and, in the longer term, India.
Despite many uncertainties about its scope and duration, the shale revolution will continue to insulate the United States from market shocks affecting the global price of both crude oil and liquefied (shipped) natural gas. Oil exporters such as Saudi Arabia have previously wielded a hugely powerful "energy weapon," exerted with devastating effect after the Arab-Israeli war of 1973. And gas producers, most notably Russia, have sometimes exercised a comparable grip over the recipients of their piped supplies. But as the United States becomes increasingly self-sufficient in energy, it is acquiring, in equal proportion, more immunity from such actions, putting it in a position to exploit this to its own advantage. For example, until the advent of commercial shale in the United States around 2008-9, the adverse effects on the price of crude dictated heavily against tough measures on Iran. But since 2012 the United States has successfully supported EU sanctions on the flow of Iranian oil: these measures have drastically reduced Iran's exports, slashing its revenues and punishing its economy without pushing global oil prices over $100 a barrel.
America’s breakout position in the shale revolution raises a number of strategic possibilities. For example, the United States could manipulate the price of energy for its political rather than narrowly commercial benefit. Future U.S. shale output could depress the market price of crude oil and liquefied natural gas and undermine the viability of other countries’ shale- (and conventional-) energy industries, which require well-defined break-even costs and clear margins. By doing so, the United States could maintain its clear strategic advantage as a virtually self-sufficient producer. Comparisons can be drawn to the Cold War in the 1980s, when Saudi overproduction depressed the price of crude oil and thereby depleted the Soviet Union's revenues; or to Moscow's decision, in 2010, to abandon the massive Shtokman gas field, the viability of which was undermined by sharply lower market prices. Of course, such an approach could damage America's own shale industry, whose profits and margins would also come under pressure.