Shale gas and oil revolution reshaping world economy and politics ...

This situation, if it comes to pass (and this is still a big ?if?, as the prospects for shale development are far from clear), will inevitably be a serious issue for Russia, which is a leading supplier of energy resources to the world market. Moscow will surely need to adjust its internal and external policies.

Ten years ago, it was impossible to imagine that the United States would become a major producer of natural gas and overtake Russia for first place in volume of production. Now, it is a fact. Many countries have begun to develop shale gas, including Poland, Ukraine, Australia, the UK and China. According to media reports, by 2032 the United Kingdom will be able to meet a quarter of its needs with this type of fuel.

New technologies have been developed that make it feasible to extract shale oil in many countries. For example, according to available information, Japan is betting on it. Japan Petroleum Exploration Company has managed to extract liquid shale oil, which may solve the country?s acute power shortage, exacerbated by Tokyo?s decision to abandon nuclear energy in the future.

The shale revolution, if it happens, will inevitably have a major impact on international relations. Imagine a purely theoretical scenario: the USA, Western Europe and China stop importing oil and gas, or at least dramatically reduce imports. It is safe to say that the oil monarchies of the Persian Gulf would be among the biggest losers in such a scenario. Demand for their products would plummet, and they would have to significantly scale back their geopolitical ambitions.

The United States would become less interested in Central Asia, and pipeline projects bypassing Russia would likely come to a halt. The future of Caspian Sea development would be in question. Perhaps, instead of trying to gain access to foreign energy reserves, Washington would focus its efforts on other areas, such as restoring its position in the Western Hemisphere (i.e. Latin America), which has weakened in recent years.

China, which is also planning to start domestic production of shale gas and oil, would very likely lose interest in Central Asia. Chinese expansion into Africa would also peter out, and Beijing?s dependence on oil supplies from the Persian Gulf would diminish.

At first glance, if shale technology lives up to the hype, Russia would appear to be in the camp of losers. This, however, is not quite true. First, the country has a more diverse economy than, say, Saudi Arabia. It is of course heavily dependent on oil and gas revenues, but a fall in the latter would provide a further powerful stimulus to economic diversification.

It should be emphasized that the above scenario is only hypothetical and may remain so. It will be at least seven to tenyears before we understand the real impact of shale on international relations, and it may take even longer. Nonetheless, it is better to start thinking about it today.

Source: http://english.ruvr.ru/2012_10_05/Shale-gas-and-oil-revolution-reshaping-world-economy-and-politics/

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