Long live American shale oil?

Should we save the world or save the planet? From satellite images, analysts[1] established that the oil plateau between Texas and Arizona, the Permian basin, from which a quarter of American oil production is drawn, would have sunk by more than twenty centimeters in ten years. The number of earthquakes with a magnitude greater than 2.5 increased from 42 in 2017 to 671 in 2022. The cause is the exploitation of American shale oil which destabilizes the soil with hydraulic fracturing, since it is This involves infiltrating masses of water under pressure, mixed with chemical agents, into the subsoil.

Wise hypocrisy.

A priori, an ecological monstrosity, like any mine. The Europeans have banned the exploitation of shale gas and oil, France has even banned its detection. Wise hypocrisy. Because Europe consumes tons of it, which saves it, and to a large extent the world.

Proponents of shale gas say its development reduces coal use and CO² emissions. Coal still represents 40% of CO² emissions worldwide, a new consumption record (8.5 billion tonnes) was reached last year. As for oil, it is doing well, according to OPEC: peak consumption will be reached next year, with 105 million barrels per day worldwide. Then it should drop.

Why isn’t the price of oil going higher? Why has the price of gas, which had increased tenfold at the outbreak of the Ukrainian war, fallen again? Thanks to American shale oil and gas.

The “OPEC +” countries (i.e. with Russia) are reducing production as best they can. But their global market share has fallen to 50%. The United States has been the world’s leading producer since 2014 (17% of global oil production, ahead of Saudi Arabia and Russia; 23% of gas production, ahead of Russia). In 2006, their energy dependence rate was 30%. Today, they are net exporters. When we look for explanations for the economic gap between Europe and the United States, the answer is there.

The American economy grew by 60%, that of the Euro zone by 30%. The answer is there.

Since 2002, the Euro Zone has experienced average annual growth of 1.2% compared to more than 2% in the United States. The American economy grew by 60%, that of the Euro zone by 30%. The American miracle is shale. It is he who supports growth, employment, the dollar, the financing of start-ups, the creation of giants of the digital economy, research, and military spending.

This does not only concern the American economy, which is the first in the world, which sets the pace for the others; this changes the great world game, the price of energy, wars.

The American economy benefits from cheaper energy than Europe or China, thanks to shale gas, mainly consumed locally, due to the difficulty of transport. On the other hand, American production weighs on world prices: to break the boom in shale oil, between 2015 and 2020, Russia and Arabia increased production to bring the price of a barrel below the break-even point for wells. American oil. Many wells are closing. With the covid crisis, prices have collapsed to less than $30 per barrel.

With the post-covid recovery, and the Ukrainian war, prices are soaring. The wells reopen. Technical improvements in shale oil exploitation are lowering the exploitation threshold to less than $50 per barrel. And European sanctions against Russia open up a long-term perspective for American gas, which manages to supply Europe.

Without American gas, Europe would be in a permanent energy crisis; the world too.

Without American gas, Europe would be in a permanent energy crisis; the world too. No one could stop coal mines from reopening. Unless we give in to Russia, which would not prevent it from establishing a balance of power and permanent, energy and military blackmail.

Europeans, and the world, are thus dependent, more or less benevolently, on American hydrocarbons. Better competition from suppliers than the monopoly of OPEC plus Russia.

But the goodwill may not last. The oil states, the “Energy states” vote “Republican” (Texas, Louisiana, New Mexico, North Dakota, Alaska, Colorado, Oklahoma), their influence in the country is commensurate with their wealth. We understand the voters: The sky did not fall on their heads, wealth came from the ground. No city was razed. And then Democratic California is also built on a volcano. If she had oil she would vote for Trump. Texas’ CO² is no worse than Siberia or Iran. Trump’s incomprehensible success cannot be explained only by oil, but also by oil, all the more radically as the Democrats become radicalized.

If the earth moves, the world moves too. Wars have pushed ecological anxiety down a notch. Nuclear power has made a comeback. The ecological transition remains under threat from energy prices and global imbalances.

With shale oil and gas, the United States keeps oil prices within an acceptable range for the world economy, its own. Oil can’t be too low, for Permian Basin wells. Neither too high, so as not to fuel global inflation and disrupt growth.

The ecological transition remains under threat from energy prices and global imbalances.

American shale maintains a precarious balance. Which allows war, but not total war. He gradually breaks up Russia, confines China, maintains Arabia. Without American oil and gas; energy prices would be unbearable for the majority of the planet’s inhabitants: Europe, India, China, Japan, poor non-oil countries. And the oil-producing countries would be prey. Strange curse of oil: Venezuela, Libya, Iraq, what would happen to Kazakhstan if oil soared? Wars would multiply.

But high-intensity war is nuclear destruction. The low intensity one is raids, hunger, slavery, as is happening in Sudan and the Democratic Republic of Congo. Right now. In indifference. A quarter of the population of the DRC, due to war, is threatened by hunger. To save the planet, start by saving the world. Avoid poverty, war and hunger. War and hunger are a couple.

Obviously the exploitation of shale gas is reprehensible from an ecological point of view. Locally. Worldwide, it’s something else. Europe would be very cold. The world is very hot.

Gain energy independence.

Europe has understood that, just as remaining dependent on the Americans for its defense is dangerous, remaining dependent on hydrocarbons, whether Russian, American, or Arab, is just as dangerous. Hence the imperative of the energy transition, as much ecological as political. We must gain energy independence. American shale gas finances an economy that must succeed in the ecological transition.

Europe must do without hydrocarbons. Humanity will heal itself. It takes time, and money. It’s as easy as going without sugar. Try it, you’ll see. We’re getting there: start by no longer sweetening the coffee. And eat fruit. Local.

Laurent Dominati

[1] Source: https://www.b3insight.com/permian-basin-produced-water-disposal/