The American Revolution for Energy Independence
You wouldn’t know it, but according to recent reports the United States is on the road to energy independence. That’s the same “energy independence” that American political leaders have been promising the electorate for years, lambasting America’s addiction to foreign oil.
And thanks to a relatively unknown sedimentary rock called shale, it seems that true energy independence may very well be within arms reach. Recent technological advancements in hydraulic fracturing or “fracking” and horizontal drilling has unleashed access to a wealth of oil and gas shale deposits formerly thought inaccessible. And the discoveries since have been monumental.
Today, America sits on some of the largest shale oil deposits, most notable is the Green River Formation, the world’s largest formation which is estimated to hold nearly 1.45 trillion barrels.
To better explain the magnitude of this reserve, the largest discovered oil field is Saudi Arabia’s Ghawar Field, whose capacity is around 260 billion barrels, only a fraction of the Green River Formation. In the past two years alone, the US has reversed a nearly forty year decline of U.S. oil production.
Meanwhile, the US domestic gas industry has also been on production overload with the discoveries of large domestic shale gas deposits. The largest deposit discovered so far is the Marcellus shale gas formation. Found in the Appalachia region, the deposit, according to the U.S. Department of Energy, is estimated to hold around 141 trillion cubic feet of natural gas.
Becoming a Leader in the Energy Market
Everything about the recent shale revolution has the trappings of what American policy makers and consumers have been clamoring for: energy independence, lower energy bills, and perhaps most important, jobs. And if this wasn’t enough, many experts predict that in the next few decades the U.S. may become – wait for it – the world’s leading oil exporting country. Furthermore, ground breaking technological development in liquefying and transporting natural gas, or also known as liquefied natural gas (LNG), has created a booming LNG market in East Asia and in Europe.
Just yesterday, reports came out from the Department of Energy that Secretary Steven Chu was mulling over whether to begin increasing LNG exports of excess American natural gas, which has been at a trickle. The question of what to do with excess domestic gas would have been an unthinkable luxury for an Energy Secretary a decade ago. In addition to becoming a leading energy supplier, the U.S. has also become a leader in energy trading, especially in the gas trading market. Today, America is home to the world’s largest and most liquid gas trading hub, the Henry Hub.
Unlike continental Europe where gas sales and distribution is dominated by monopolies and quasi-state corporations, the system in the U.S. has long been dismantled, or as they call “unbundled.” The result of liberalizing the gas market has led to cheaper gas and more efficient deliveries through supply and demand trading based portals called “hubs.”
What about Green Energy?
Impressive and almost revolutionary as all these new developments may be, after years of sound bites calling for for “new sources,” “alternative,” and “renewable” energy, the question to ask is: Wasn’t the road to energy independence supposed to be paved green and not with oil and gas?
What will happen to the likes of wind or solar energy? There are those who argue that natural gas is the next alternative energy. After all, the extraction and combustion is far cleaner than any of its other thermal counterparts (ie: oil, coal, or ethanol) and we do have a abundant supply of it. Meanwhile, others argue that it is a “bridge” fuel, it’s lower emissions make it the appropriate energy source to rely on while efficient and more cost-effective solar and wind alternatives are being developed.
For many proponents of greener energy, the discovery and abundance of American shale oil and gas was the toothpaste that already came out of the tube. The political and economic pluses, on both the federal and state level, is far too tempting to deny.
While this may not be the death knell of the green energy industry, it may become harder to advocate for a larger role in the U.S. energy production, especially since the U.S. may soon become a big player in the oil and gas export industry. Nevertheless, the good news is that green energy technology is developing and improving year after year. But for the U.S. economy, the even better news is that oil and gas are here to stay.