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A Surprising New Global Energy Superpower A Surprising New Global Energy Superpower

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A Surprising New Global Energy Superpower

Five years after the Great Recession, Texas and North Dakota are producing new oil and natural gas faster than Russia and Saudi Arabia—and America is emerging as the world's energy superpower.

For many, 2008 stands out as a defining year for the global economy, with the collapse of Lehman Brothers, the housing bubble and the worst economic recession since the Great Depression.

Just five years later, 2013 may be as pivotal a year for the global economy but for very different reasons: according to a recent Energy Information Agency (EIA) report, the U.S. will be the world's largest producer of natural gas and oil this year.

 

Advances in horizontal drilling technology have made this significant increase in U.S. energy development possible. Since 2008, natural gas production on the East Coast and oil production in Texas and North Dakota have increased U.S. cumulative production by 10 quadrillion British thermal units (Btu), far outpacing other energy-rich nations. Russia and Saudi Arabia, by comparison, have cumulatively increased hydrocarbon production by only one-tenth of that amount during the same period.

Entrenched energy powers are concerned about the new competition. Prince Alwaleed bin Talal, the billionaire Saudi Arabian investor, said earlier this year that "raising North American shale gas production is an inevitable threat" to that country's oil-dependent economy.

This dynamic is unlikely to change. With vast energy reserves, superior technology and extensive energy infrastructure, the U.S. stands alone in its ability to develop, refine and deliver natural gas. "There's no commercially-viable shale gas production outside the U.S. and Canada," says Aloulou Fawzi, an EIA economist. And EIA data shows that the U.S. produced nearly five times as much natural gas as Canada in 2012.

 

This tremendous shift in the energy sector has far-reaching impacts around the world.

New energy development has given the U.S. a significant measure of energy security. According to EIA, the U.S. has reduced net imports by 41 percent between 2005 and 2012 and is poised to increase energy exports to allies overseas. The U.S. Department of Energy has given conditional approval to build four terminals that will export American liquefied natural gas to hungry European and Asian power markets. Many other export terminal permits are pending approval.

Decreased imports and increased exports have tangible economic and national security benefits for the U.S. Increased production will reduce the U.S. trade deficit by $164 billion in 2020, according to IHS—equivalent to one-third of the U.S. deficit. They can also insulate the economy from overseas energy supply shocks.

More broadly, increased energy exports mean more jobs, more investment in manufacturing and stronger local economies here in the U.S. It also strengthens the U.S.'s diplomatic position in international negotiations as the availability of American energy gives allies an alternative to energy from nations that may not share their interests.

A stronger economy and global geo-political standing are not the only benefits of the U.S.'s new energy discoveries. American natural gas is also responsible for slowing the progression of global climate change.

The power sector is the largest emitter of greenhouse gases, like carbon dioxide, and increased utilization of natural gas for power has significantly driven down greenhouse gas emissions, as well as other pollutants such as sulfur dioxide, particulate matter and mercury.

"Cheap natural gas has begun to displace coal for power generation, which was a key reason U.S. greenhouse gas emissions were 12 percent lower in 2012 than in 2005," said Jason Bordoff, Director of the Center on Global Energy Policy at Columbia University and former Special Assistant to President Obama. Greenhouse gas emissions are currently at their lowest levels since 1994, even while the economy grew 2.8 percent in 2012.

This reduction in emissions has put America on the path to achieving the Obama Administration's commitment to a 17 percent reduction in emissions by 2020, which President Obama made at 2009's United Nations international climate change negotiations in Copenhagen. Although no binding treaty has emerged from the U.N., America's abundant, affordable supply of natural gas is making reductions in greenhouse gas emissions possible.

Innovative drilling technology has transformed the U.S. into an energy superpower. Current predictions indicate that no other country is likely to overtake the U.S. in the near term, turning the conventional wisdom of energy geopolitics on its head and positioning the U.S. for continued leadership on the global stage in the 21st century.