Madsen Pirie

Shale gas has changed the game for the world’s energy future, giving us many decades (even centuries) of reserves of a fuel that is cleaner than coal and oil, and at prices that will not inhibit economic development.  Furthermore, much of it is located in regions that are less susceptible to political turmoil than many current oil producers.  Now shale oil from the US has made its appearance as a major factor in future supply.  It is estimated that the US will produce a third of the world’s new oil supplies over the next few years, becoming a net exporter rather than an importer.  It will be self-sufficient in energy by 2035, some analysts think even sooner.

An obvious question is “Where does this leave the Middle East?”  The answer is that it leaves them with their economies dependent on a product that is declining in importance.  The extra supply of US shale oil will put downward pressure on prices, and the switch from oil to gas will do the same for demand.  This is a recipe that points to political upheaval.  Some Middle East regimes have used the wealth from oil revenues to keep popular discontent at bay.  If that wealth begins to dry up, uprisings might follow.  On a geopolitical level, the advanced economies, especially the US, will be less concerned with developments in the Middle East, and will have less inclination to be deeply involved in them.  Put bluntly, the Middle East is going to matter far less than it has done.  It may not be a bad thing to see Western economies relatively indifferent to what happens there.

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