Tapping 100 years of US natural gas at light speed

The history of energy is filled with unexpected developments and eras of transformation. It's the pace of the latest developments that continues to surprise. Long fundamental to the global economy, energy today has become the new crucible of global competitiveness for companies and for nations, redefining the landscape for economics, geopolitics and strategy.

Much of this has been driven by North America's unconventional revolution in the form of shale gas and tight oil—augmented, as well, by renewables. The United States now has more than 100 years' worth of natural gas supply. Domestic crude-oil production has grown by 3 million barrels since 2008—more than 60 percent.

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The notion of U.S. "energy independence," long dismissed as a serious goal, is now a topic of serious conversation, even if the real answer will probably be "a lot less dependent." The prospect of the U.S. becoming a crude-oil exporter—once unthinkable—is now becoming a source of growing debate.

The economic impact of these developments has been profound. Unconventional oil and gas production supported more than 2 million jobs in the United States in 2012, a figure that could rise to more than 3 million by 2020.

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But it is the dramatic impact on global economic competitiveness that is just now coming into view. The abundance in low-cost natural gas in the United States compared to other regions (for example, U.S. gas prices are one-third the price of Europe) has made U.S. industry increasingly competitive. This has turned the country into a growing destination not only for U.S. but also for foreign industrial investment. This investment involves not only energy-intensive industries like chemicals and metals but also companies in the supply chains that support such industries.

The spread of the unconventional oil and gas revolution on other continents is still taking shape, but the influence of this new competitive force can be seen around the world in such developments as Mexico's recent energy reforms—it's opening up its government-controlled oil and gas business to private investment—and the impact of sanctions on Iran. It is also evident in countries such as Germany, where there is growing recognition of the need to reform energy policies—particularly the rapid deployment of renewable technologies—to confront rapidly rising energy costs.

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The drive for renewables continues, to be sure. Last year $200 billion was invested in renewable electric generation, compared to just $5 billion in 2000. Costs of solar have come down substantially. But with that growth is coming greater recognition of the need for balance so that decarbonization benefits do not come at the price of economic competitiveness and jobs. It is here where the unconventional revolution—particularly shale gas—may go global as a lower-cost, lower-carbon companion to renewables in power generation.

Market forces and government policy will be crucial in finding that balance. And innovation—with its power to increase efficiencies, lower costs and create new possibilities—will be indispensable.

The new competitive landscape—with energy at its center—will influence the course of the global economy for years to come. The impact of this competition—among fuels, technologies, investments and certainly among nations and how companies and nations navigate it—is what leaders from energy, policy, technology and financial communities from around the world are beginning to discuss.

By Daniel Yergin, vice chairman of IHS and author, most recently, of "The Quest: Energy, Security, and the Remaking of the Modern World." He is the chair of this week's IHS CERAWeek conference on Energy and the New Global Competition in Houston, bringing together more than 2,800 energy thinkers from 50 countries.

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