The EU versus US Energy Strategy

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By Abboud Zahr

Less than a decade ago, the future of U.S. energy looked bleak. Domestic production of both oil and gas was dwindling and big American energy companies, believing their future lays offshore, had long since turned away from the mainland. But then, something remarkable occurred: a surge of innovation allowed companies to extract vast quantities of natural gas trapped in once- inaccessible deposits of shale rocks. The resulting abundance drove down U.S gas prices to about one-third of the global average.

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Natural gas has been a godsend for the United States. Gas has spurred a manufacturing renaissance, with investors spending billions of dollars on new facilities such as chemical, steel and aluminum plants.

The shale boom has created hundreds of thousands of new high-paying jobs and now more than one million Americans work in the Oil & Gas industry, an increase of 40% between 2007 and 2013. This development has given the U.S. a long-term economic advantage and helped the country be energy independent.

Are we going to see much development in other countries? Will the countries which are drilling presently for shale gas going to succeed in duplicating the U.S. model? The answer is that very few countries will succeed. The reason is that only the United States possesses the unique ingredients necessary to develop shale resources.

A legal system that presents the private ownership of land and the resources below it, along with open capital markets and the technical know-how, has led to the growth of thousands of independent oil & gas companies. In other parts of the world, the mineral rights are virtually all owned by sovereign governments. As a result, nearly 4 million oil & gas wells have been drilled in the U.S, versus 1.5 million in the rest of the world during the last few years.

Although China and Europe have substantial shale resources, they don’t have the entrepreneur-friendly system needed to develop these resources quickly and productively. These countries cannot sustain thousands of independent oil and gas companies established during the last few years in the U.S., their resources must be exploited by bureaucratic, slow-moving national companies or international giants, which have to deal with even more bureaucratic governments and complicated regulatory systems.

 

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In Europe, development of shale gas is being slowed by the ‘’not in my background’’ syndrome. Unlike people in Southern states of the U.S. who have grown up with the oil & gas industry, foreign populations are usually unfamiliar with it. France has banned fracking entirely and Germany has put a de facto moratorium in place.

Europe must rethink its energy policies.

At the beginning of this century, European politicians agreed that their continent should lead the world in shifting to green energy and reducing carbon dioxide emissions. They committed tens of billions of dollars of taxpayers’ money to subsidize wind and solar power generation that were not yet efficient or reliable enough to compete. It is still questionable whether Europe’s move towards green energy will lead to the results its advocates have predicted.

In order to meet growing power demands, dirty coal freed up by the U.S. shift to natural gas is exported to Europe, thus increasing the pollution and emissions. The energy policies are leading to counter-results. Europe’s costly and not very efficient energy sources are acting as a brake for its economic growth. And consequently, while the U.S reindustrialize, thanks to the shale gas revolution, Europe will face deindustrialization and economic stagnation.

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Natural gas is up till now relatively the cleanest hydrocarbon and its availability by the nations strengthens the economy, creates growth and wealth to the countries which are extracting it.

 

Author: Abboud Zahr, Oil & Gas Specialist

3 Comments on this Post

  1. Very interesting.

  2. Excellent article, new ideas, need to be implemented swiftly.

  3. Brian Cook

    If optimism was cash then the EU countries would be the richest in the world

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