by David Sweet

The ‘Holy Grail’ for those nations unlucky enough to be net energy consumers has been the elusive promise of energy independence. While efficient decentralized energy technologies can contribute to energy security, for developed nations with a mix of energy needs, they alone are not enough to gain independence from imports. In the US, the bill for imported oil approaches one billion dollars per day to fuel the love affair with the automobile and the highway.

The emergence of ‘shale gale’ – the production of natural gas from shale formations – has brought about a sea change in the world of natural gas and almost overnight turned the US from a country that was building LNG import facilities to one that could be a serious global exporter of LNG in a few short years. On 16 April, the US approved the Sabine Pass project, which could be the first in a wave of LNG export projects. With natural gas prices in the US hovering at decade-long lows that are not only well below historical prices but also a fraction of the world price for natural gas, market fundamentals suggest the US will not only become natural gas independent, but will join the club of exporting nations.

The situation with respect to oil is equally encouraging. The same technology that is being applied to natural gas production is being deployed with growing success in the search for oil. So much so that, in a stunning research report by Raymond James, the US is predicted to achieve oil independence by 2020 (and given the relatively conservative assumptions on which this is based, independence could actually arrive much sooner). This is not only a result of growing production, but also factors in another interesting trend – the reduction in oil demand. Oil demand is down as a result of increased vehicle efficiency and reduced driving patterns brought about by higher gasoline prices. The net effect of growing production and reduced demand is, of course, the eventual elimination of imports.

The implications of this new-found energy independence are profound for the US and for the world. The ability to produce energy from tight formations is not unique to the United States. We will see non-traditional producing countries begin to exploit similar resources and possibly shift from net importers to exporters. For decentralized energy, the news should be positive, as many of these reserves will be near population centres that will support local power generation projects.

However, think of the geopolitical consequences if OPEC no longer had the power to set prices; if the Persian Gulf was just a nice spot for a boat ride; if Europe was no longer reliant on Russian gas; if the billions of dollars spent each day to import energy could be kept closer to home; if the threat of war over energy resources was eliminated. The world is changing and there will be winners and losers in this new paradigm. These changes in energy production and use are happening at a remarkable pace, and we can only begin to imagine the full global impact.

David Sweet
Executive Director, WADE
dsweet@localpower.org

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