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« Is a Carbon Tax a Done Deal for the US? | Main | Strong interest in NSW uranium exploration »
Tuesday
Nov202012

America’s oil bonanza

A good thing—but it would be better if energy was priced correctly in the United States

THE shale-gas revolution in America has been as sudden and startling as a supertanker performing a handbrake turn. A country that once fretted about its dependence on Middle Eastern fossil fuels is now on the verge of self-sufficiency in natural gas. And the news keeps getting better. This week the International Energy Agency (IEA) predicted that the United States would become the world’s largest oil producer by 2020, outstripping Saudi Arabia and Russia (see article).

Why has this happened? Price signals work. Oil has been costly for more than a decade. This has spurred prospectors to look harder for unconventional fuels: oil and gas that lie deep under the sea, buried in shale beds or stuck in Canada’s vast oil sands (see article). They have developed whizzy technology to extract these hydrocarbons, with such success that North America now has a gas glut. Prices have plummeted, prompting shale-gas frackers to drill for pricier shale oil instead. According to the IEA, America could become self-sufficient in energy by 2035. Bolder analysts say sooner. Canada has immense potential, too. Besides the oil sands, a recent report suggests that the province of Alberta alone may have shale gas and oil reserves to rival America’s.

The North American hydrocarbon bonanza offers big benefits, but also some pitfalls. The economic pluses are obvious: cheap gas yields cheap electricity, which boosts American industry, especially power-hungry sectors such as aluminium, steel and glass. Cheap gas also buoys petrochemicals firms, which use it to make useful stuff such as plastic. Also, America consumes some 19m barrels of oil a day. Imported oil costs $109 a barrel. Not having to pay Saudi Arabia for this is a boon.

The environmental scorecard is more mixed. Burning fossil fuels adds to greenhouse-gas emissions, which cook the planet. But the dash for gas has reduced American emissions, since gas is cleaner than coal. By contrast, in Europe, which does have a carbon-trading system but never developed shale gas, emissions have risen over the past three years. Europeans are shuttering nuclear-power plants and backsliding to filthy coal.

To read this article in full please click here, courtesy of The Economist


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