By Fareed Zakaria
In my column in today's Washington Post, I argue that the rise of shale gas is shaping up to be the biggest shift in energy in generations. And its consequences - economic and political - are profoundly beneficial to the United States. Here's an excerpt:
No one could have predicted that oil prices would rise to today’s levels. Saudi Arabia’s oil minister, Ali al-Naimi, says that they are irrationally high, pointing out that world demand is lower than the available supply and that Saudi oil inventories around the world are largely untapped. The “irrational” cause, of course, is fear of a war with Iran. But it would also have been unpredictable that a 47 percent hike in oil prices since November 2010 would not cause a major slowdown in the U.S. economy. One reason it hasn’t might well be the rise of shale gas.
By now, the basic facts are well known. It was only a few years ago that most experts were warning of an imminent shortage of natural gas in the United States. But thanks to the efforts of a small private company, Mitchell Energy, combined with a horizontal drilling procedure called hydraulic fracking, it has become possible to extract vast quantities of natural gas from shale, which this country has in abundance.
As with so many stories of American ingenuity, Mitchell Energy had a little help. In the 1970s, the federal government initiated the Eastern Gas Shales Project and funded dozens of hydro-fracking demonstration projects. The Energy Department pioneered a technique known as massive hydraulic fracturing, a key step along the way. It subsidized Mitchell Energy’s first successful horizontal drilling in the North Texas Barnett Shale region in 1991. Between 1978 and 1992, the federal government spent $137 million to develop these technologies.
Whoever gets the credit, the effects are widespread. The United States now has, at current consumption rates, at least 75 years’ worth of recoverable natural gas. More important, the United States has become the world’s low-cost producer of natural gas. That fact is already changing the future of U.S. manufacturing. Companies such as Dow Chemical and Westlake Chemical are finding that low U.S. energy costs can mitigate the lower cost of labor in Asia - making it economical to keep and even build manufacturing facilities in the United States.