Special Report

The Americas, Not the Middle East, Will Be the World Capital of Energy

Adios, OPEC.

For half a century, the global energy supply's center of gravity has been the Middle East. This fact has had self-evidently enormous implications for the world we live in -- and it's about to change.

By the 2020s, the capital of energy will likely have shifted back to the Western Hemisphere, where it was prior to the ascendancy of Middle Eastern megasuppliers such as Saudi Arabia and Kuwait in the 1960s. The reasons for this shift are partly technological and partly political. Geologists have long known that the Americas are home to plentiful hydrocarbons trapped in hard-to-reach offshore deposits, on-land shale rock, oil sands, and heavy oil formations. The U.S. endowment of unconventional oil is more than 2 trillion barrels, with another 2.4 trillion in Canada and 2 trillion-plus in South America -- compared with conventional Middle Eastern and North African oil resources of 1.2 trillion. The problem was always how to unlock them economically.

But since the early 2000s, the energy industry has largely solved that problem. With the help of horizontal drilling and other innovations, shale gas production in the United States has skyrocketed from virtually nothing to 15 to 20 percent of the U.S. natural gas supply in less than a decade. By 2040, it could account for more than half of it. This tremendous change in volume has turned the conversation in the U.S. natural gas industry on its head; where Americans once fretted about meeting the country's natural gas needs, they now worry about finding potential buyers for the country's surplus.

Meanwhile, onshore oil production in the United States, condemned to predictions of inexorable decline by analysts for two decades, is about to stage an unexpected comeback. Oil production from shale rock, a technically complex process of squeezing hydrocarbons from sedimentary deposits, is just beginning. But analysts are predicting production of as much as 1.5 million barrels a day in the next few years from resources beneath the Great Plains and Texas alone -- the equivalent of 8 percent of current U.S. oil consumption. The development raises the question of what else the U.S. energy industry might accomplish if prices remain high and technology continues to advance. Rising recovery rates from old wells, for example, could also stem previous declines. On top of all this, analysts expect an additional 1 to 2 million barrels a day from the Gulf of Mexico now that drilling is resuming. Peak oil? Not anytime soon.

The picture elsewhere in the Americas is similarly promising. Brazil is believed to have the capacity to pump 2 million barrels a day from "pre-salt" deepwater resources, deposits of crude found more than a mile below the surface of the Atlantic Ocean that until the last couple of years were technologically inaccessible. Similar gains are to be had in Canadian oil sands, where petroleum is extracted from tarry sediment in open pits. And production of perhaps 3 million to 7 million barrels a day more is possible if U.S. in situ heavy oil, or kerogen, can be produced commercially, a process that involves heating rock to allow the oil contained within it to be pumped out in a liquid form. There is no question that such developments face environmental hurdles. But industry is starting to see that it must find ways to get over them, investing in nontoxic drilling fluids, less-invasive hydraulic-fracturing techniques, and new water-recycling processes, among other technologies, in hopes of shrinking the environmental impact of drilling. And like the U.S. oil industry, oil-thirsty China has also recognized the energy potential of the Americas, investing billions in Canada, the United States, and Latin America.

The revolution-swept Middle East and North Africa, meanwhile, will soon be facing up to an inconvenient truth about their own fossil-fuel legacy: Changes of government in the region have historically led to long and steep declines in oil production. Libya's oil output has never recovered to the 3.5 million barrels a day it was producing when Col. Muammar al-Qaddafi overthrew King Idris in 1969; instead it has been stuck at under 2 million barrels a day for three decades and is now close to zero. Iran produced more than 6 million barrels a day in the times of the shah, but saw oil production fall precipitously below 2 million barrels a day in the aftermath of the 1979 Islamic Revolution. It failed to recover significantly during the 1980s and has only crept back to 4 million in recent years. Iraq's production has also suffered during its many years of turmoil and now sits at 2.7 million barrels a day, lower than the 3.5 million it produced before Saddam Hussein came to power.

The Arab Spring stands to complicate matters even further: A 1979-style disruption in Middle Eastern oil exports is hardly out of the question, nor are work stoppages or strikes by oil workers caught up in the region's political zeitgeist. All in all, upwards of 21 million barrels a day of Arab oil production are at stake -- about a quarter of global demand. The boom in the Americas, meanwhile, should be food for thought for the Middle East's remaining autocrats: It means they may not be able to count on ever-rising oil prices to calm restive populations.

This hydrocarbon-driven reordering of geopolitics is already taking place. The petropower of Iran, Russia, and Venezuela has faltered on the back of plentiful American natural gas supply: A surplus of resources in the Americas is sending other foreign suppliers scrambling to line up buyers in Europe and Asia, making it more difficult for such exporters to assert themselves via heavy-handed energy "diplomacy." The U.S. energy industry may also be able to provide the technical assistance necessary for Europe and China to tap unconventional resources of their own, scuttling their need to kowtow to Moscow or the Persian Gulf. So watch this space: America may be back in the energy leadership saddle again.

Dieter Spannknebel/Getty Images

Special Report

The World Will Be More Crowded -- With Old People

Actually, the children aren't our future.

Demography is not destiny, as is sometimes claimed. The human race could be wiped out by a plague or an asteroid, or transformed by some new technology. But no matter what, today's patterns of fertility, migration, and mortality fundamentally determine how much society will or can change for many generations to come.

And what demography tells us is this: The human population will continue to grow, though in a very different way from in the past. The United Nations' most recent "mid-range" projection calls for an increase to 8 billion people by 2025 and to 10.1 billion by century's end.

Until quite recently, such population growth always came primarily from increases in the numbers of young people. Between 1950 and 1990, for example, increases in the number of people under 30 accounted for more than half of the growth of the world's population, while only 12 percent came from increases in the ranks of those over 60.

But in the future it will be the exact opposite. The U.N. now projects that over the next 40 years, more than half (58 percent) of the world's population growth will come from increases in the number of people over 60, while only 6 percent will come from people under 30. Indeed, the U.N. projects that by 2025, the population of children under 5, already in steep decline in most developed countries, will be falling globally -- and that's even after assuming a substantial rebound in birth rates in the developing world. A gray tsunami will be sweeping the planet.

Which countries will be aging most rapidly in 2025? They won't be in Europe, where birth rates fell comparatively gradually and now show some signs of ticking up. Instead, they'll be places like Iran and Mexico, which experienced youth bulges that were followed quickly by a collapse in birth rates. In just 35 years, both Iran and Mexico will have a larger percentage of their populations over 60 than France does today. Other places with birth rates now below replacement levels include not just old Europe but also developing countries such as Brazil, Chile, China, Lebanon, Tunisia, South Korea, and Vietnam.

Because of the phenomenon of hyper-aging in the developing world, another great variable is already changing as well: migration. In Mexico, for example, the population of children age 4 and under was 434,000 less in 2010 than it was in 1996. The result? The demographic momentum that fueled huge flows of Mexican migration to the United States has waned, and will wane much more in the future. Already, the net flow of illegal Mexican immigration northward has slowed to a trickle. With fewer children to support and not yet burdened by a huge surge of elders, the Mexican economy is doing much better than in the past, giving people less reason to leave. By 2025, young people on both sides of the border may struggle to understand why their parents' generation built this huge fence.

Despite these trends, most people conclude from their day-to-day lives that overpopulation is a serious problem. One reason is that more than half the world's population is crowded into urban areas. The high cost of raising children in mega-cities is a prime reason that global birth rates continue to fall, yet urbanization also makes the larger trend toward depopulation difficult for most to grasp. If the downward trend in birth rates doesn't moderate and stabilize as the U.N. assumes it will, the world as a whole could be losing population as soon as midcentury. And yet few people will likely see that turning point coming, so long as humans continue to pack into urban areas and increase their consumption of just about everything.

Another related megatrend is the rapid change in the size, structure, and nature of the family. In many countries, such as Germany, Japan, Russia, and South Korea, the one-child family is now becoming the norm. This trend creates a society in which not only do most people have no siblings, but also no aunts, uncles, cousins, nieces, or nephews. Many will lack children of their own as well. Today about one in five people in advanced Western countries, including the United States, remains childless. Huge portions of the world's population will thus have no biological relatives except their parents.

And even where children continue to be born, they are being raised under radically different circumstances, as country after country has seen divorce and out-of-wedlock births surge and the percentage of children living with both of their married parents drop sharply. So not only is the quantity of children in the world poised to shrink rapidly, but on current trends, a near majority of them will be raised in ways that are today strongly associated with negative life outcomes.

Are there signs of any of these trends reversing before 2025? Only a few. The percentage of the world's population raised in religious households is bound to rise, if only because adherents to fundamentalism, whether Christians, Jews, or Muslims, tend to have substantially more children than their secular counterparts. And there are certainly many ways -- from increased automation and delayed retirement to health-care reform to the provision of baby bonuses -- for societies to at least partially adjust to the tidal shift in global demographics.

But don't count on it. To make such sweeping changes would require a widespread understanding of the century's great paradox: The planet may be bursting, but most of this new population is made up of people who have already been born. So get ready for a planet that's a whole lot more crowded -- with old people.

Illustration by Oliver Munday for FP