How Fracking Suddenly Became a Game Changer
Don’t be too sure you know what is coming next, especially in this day and age of rapid technological innovation. Whether it is something high tech like a smartphone or as seemingly low tech as oil production, we just don’t know what is next. Except for change — we can count on lots of that, can’t we?
Energy and the Fracking Revolution
The topic of energy is challenging due to concerns from both an economic and environmental standpoint. A political hot potato for decades, the subject of endless, rancorous debate and a huge geopolitical factor since the first oil embargo in 1973…at least we thought we knew how things worked.
The Old Story
The US was and is the world’s largest economy and consumer of energy, but it lost its status as the largest producer of energy long ago, instead becoming a major importer. Bad guys controlled energy supplies that were critical to Western economies. They used supply as a weapon itself, but more importantly, they used the dollars from energy sales to fund militaries and terrorists who often opposed America and her allies and did serious harm, as well as constantly threatening Israel.
A recent Wall Street Journal piece describes a radically new picture, one whose implications are only beginning to be felt. The article itself presents compelling data and evidence that serve to reinforce this narrative: Fracking Gives U.S. Energy Boom Plenty of Room to Run
The New Story
The US has suddenly and unexpectedly become the world’s largest energy producer once again! No one saw this coming; we were resigned to our fate, and suddenly a new technology changed everything. For better or worse, we are fracking wells and dramatically increasing their productivity. The latest forecasts show production rising through 2040. And who really knows?
Several Critical Results:
1. Despite a horrific mess in the Middle East, energy prices are stable to declining! Think about that one for a minute.
2. The US is about to go from being the largest importer of energy to being a large exporter.
3. Russia will likely lose its stranglehold on natural gas supplies for Europe (Eastern and Western). This completely changes the equation, which may account for their actions today in Ukraine and elsewhere; the window of opportunity appears to be closing.
4. The long-term development of alternative energy sources can be better supported, because the short-term needs of Western economies can be well supplied at reasonable prices. And innovation also continues to reduce energy consumption (e.g., in autos and manufacturing).
5. Over time, these factors could result in what has to date been unthinkable: another era of cheap, abundant energy, and the dramatic reduction in funding for terrorism and other problematic players from energy revenues.
As we’ve discussed in some of our letters, even as the economy is weak overall and employment languishes, there are important positives in the US economy and in the rest of the world, as well. Never be too sure of the next phase — there are always surprises in store.