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America’s Shale Oil and the Changing Geopolitical Landscape

Posted on November 7, 2017 in James A. Gibbs

Rarely do I read a book that is sufficiently interesting and provocative that I keep it on the shelf for further reference. One such book that has been so influential for me is The Clash of Civilizations and the Remaking of World Order, (1996) by Samuel P. Huntington, a political scientist at Harvard. His thesis was that people’s cultural and religious identities would be the primary source of conflict in the post-Cold War world.  Huntington argued that future wars would be fought not between countries, but between cultures, and that Islamic extremism would become the biggest threat to world peace.

For me the book provided a framework for understanding and interpreting relationships of world cultures as they were at the time, and suggested scenarios of future world politics, economies and events. It’s been interesting to consider events as they’ve occurred throughout the past two decades and consider how their likely causes aligned with Huntington’s forecasts.

I recently added another such book to my shelf: The Accidental Superpower, (2014) by Peter Zeihan. Its author, an international strategist, explores the thesis that the new U.S. abundance of shale oil is creating a new paradigm of worldwide geopolitical structure.

At the end of World War II, the U.S. stood alone in the world as the one great superpower. However, unlike victors in previous wars, the U.S. did not demand tribute from the defeated countries or move to permanently occupy and subjugate them. To the contrary, as set forth in the Bretton Woods Agreement, we established the principal of worldwide free trade, opened our markets to imports of foreign goods without tariffs or prescriptive restrictions, and set our navy to be the guarantors of worldwide deep-water shipping. In so doing, we protected shipping lanes to ensure the movement of the emerging supply of crude oil and refined products that our growing economy would need in the years ahead. The overall result has produced the longest period of generally peaceful relations among all neighboring countries, especially those of the European Union.

The U.S. and other countries have prospered during the past seven decades, and the U.S. has been assured a continuing supply of imported crude oil. However, the cost to the U.S. to be the world’s de facto policeman has been a drain on our economy and treasury. It was inevitable that we would need to reduce funding to our navy and its related facilities and services at some time.

Production of shale oil is providing the opportunity and rationale for the U.S. to trim its sails. The Domestic Energy Producers Alliance (“DEPA”) recently announced that the U.S. is now “officially energy independent”. The U.S. hit the “energy independence” milestone of zero net waterborne oil imports this year, as U.S. crude exports surged to a record 2 million barrels per day. The necessity of the U.S. to maintain its expensive navy may be largely obviated. As our navy is downsized, other countries may pick up the burden of the control of shipping lanes. Most of the increases will be by countries for their own border security and protection of export markets. But they will also become a threatening competitor to the U.S.

Because of many “accidental” factors, including such fortuitous items as relative isolation, friendly countries along our borders, and a broad network of navigable rivers for the transport of raw materials from the interior areas to port centers for manufacturing and/or export, the U.S. is more favorably situated to remain the world’s dominant superpower.

The book is really three: a survey of the resources and geography of the U.S. that have made possible our growth and achievements thus far; the evolution of shale oil and the dominating influence it has and will continue to have; and a discussion of the geography and population of various countries around the world – factors that will determine the probable winners and losers in the next several decades.

The Accidental Superpower is an interesting read for almost everyone, especially those of us intrigued by the geopolitics of the oil and natural gas industry. At a minimum, it is an affirming reflection of how fortunate we are to live in a country with such abundant resources and favorable geography.