The U.S. has become an energy superpower due to the growing shale gas industry. This series will cover the impact of shale gas from three vantage points, beginning with the environment, followed by the U.S. economy and diplomacy.
Shale gas is natural gas that occurs in tiny pores within shale formations. Up until 2010, the U.S. was not able to benefit much from its large shale reserves because the cost of extracting shale gas exceeded the trading price of crude oil. The average breakeven prices for shale were over $100 per barrel then. However, when the price of crude oil reached over $100 per barrel in 2014, shale gas became more economically viable. When the U.S. started producing shale gas at competitive prices, Saudi Arabia increased its oil production to damage the U.S. shale industry as well as other oil-producing countries like Iran and Russia that were supporting the Assad regime in Syria. As a result, oil price tanked to $49 per barrel in 2015. As such, shale gas has shifted the global paradigm of energy production, and some people call it the shale gas revolution.
Shale gas has allowed the U.S. to be more energy independent. This year, the U.S became the largest oil producer in the world, thanks to shale drillers. But shale is hurting our environment.
Shale gas companies’ biggest goal has been to cut the cost of extraction in order to maintain the cost lower than the trading price of crude oil. North American shale can be produced for $30-$50 per barrel currently due to technological improvements. The extraction method is called “fracking,” and it is notorious for contaminating water and damaging land. Fracking involves using a large amount of water mixed with certain chemicals to create fractures underneath the ground where natural gas lies. These chemicals are seen as being responsible for contaminating freshwater near extraction sites, but we do not know what these chemicals are because they are proprietary secrets. We do not know how these chemicals have improved in past years to allow cheaper fracking. As a result, their exact impact on our environment is largely unknown.
The renewable energy industry is in danger too. We previously hoped that the price of renewable energy would one day become cheaper than fossil fuels when fossil fuels become scarce. This is certainly not going to happen. The U.S. alone has enough shale gas to last about 90 years, having 622.5 trillion cubic feet of recoverable shale gas. Even more surprising is that there are over 7,500 trillion cubic feet of shale gas total in the world. The amount of technically recoverable natural gas is also increasing with improvement in extraction technology. There may be no place for renewable energy in the future.
There may be no place for electric cars either. Instead of electric cars, compressed natural gas (CNG) cars may take over the future auto market due to shale supplies.
So we have many reasons to worry about increasing shale production from an environmental standpoint. Going clean energy has become a bigger challenge. The renewable energy industry must find ways to stay competitive because the world has abundant shale reservoirs. Clean energy is great, but it is not so great when we have to pay a lot more for it. Just look what rising fuel taxes triggered in France this past weekend. Also, we are not sure how exactly chemicals used in fracking are contaminating our water. We may not see the outcome of damage immediately, but our future generation certainly will.
-Jaywon Choi
