Since January 2011, at the dawn of the rebellions against dictatorial governments in North Africa, the amount of oil "offline" or being blocked from production by either domestic turmoil (in Iraq, Nigeria, Sudan, Syria, Yemen) or international sanctions (in Iran) has generally been above 2 million barrels per day (m b/d), four times the average level of supply outages before the so-called Arab Spring. Then Libya erupted once again this past summer, taking another 1.2 m b/d, or more, offline. But the impact of these disruptions has been relatively mild, given that over the same period, production in North America, the heartland of the three revolutionary changes in unconventional hydrocarbon production (shale, deep water, and oil sands), has grown by more than 2.5 m b/d. And more is on the way.
Growth in renewable energy has also been significant in recent years in the United States and beyond, and rising fossil fuel costs and strong government intervention have created new market opportunities. World biofuels production has doubled to over 1.2 m b/d since 2006, but wind power has grown in oil-equivalent terms from 1 m b/d to 2 m b/d since 2008 (and is accelerating at about a 20 percent annualized clip). Solar power, meanwhile, grew from 20,000 b/d of oil-equivalent energy in 2008 to 400,000 b/d last year.
But the impact of all this change in the energy world will go far beyond just replacing continuing Arab Spring outages. Unconventional oil and gas and the clean-tech booms are spawning a host of new, smaller oil and gas exploration companies committed to innovation and willing to take on risk. They have no stake in the multibillion-dollar megaproject world of the international majors and national oil companies, and as such, they have fewer concerns about sustaining high profits from giant assets found decades ago. They are enabling the United States the opportunity to take a lead in changing the way energy is bought and sold -- not just in the United States, but globally.
Energy innovation is taking many forms in the United States, creating major export opportunities and giving Washington the tools it needs to ensure that the conditions of a 1973-style oil embargo will not repeat themselves. The oil embargo was so devastating because strong economic growth throughout the 1960s had taken up the margin of spare oil-productive capacity in the United States and across the world, leaving the Middle East's oil producers with undue monopoly power. Similar razor-thin extra productive capacity left markets highly vulnerable in 2006 and 2007, when OPEC made contraseasonal cuts in output to increase prices, instead of considering the risks to global economic growth. But as oil and gas production from U.S. and Canadian shale formations rises, the ability of oil producers like Russia to use an "energy weapon" to gain extra benefits from consuming countries is diminishing.
U.S.-led innovation in alternative fuels (including natural gas-vehicle fueling technology and electric vehicles), energy-efficiency technologies, battery storage, and smart-grid solutions, working together with and complementing the supply surge in unconventional oil and gas, should also change the face of demand, giving consumers around the world more freedom of choice. And as the United States becomes an energy exporter -- at competitive prices -- that should seal the deal. By providing ready alternatives to politicized energy supplies, the United States can use its influence to democratize global energy markets, much the way smartphone and social media technologies have ended the lock on information and communications by repressive governments and large multinational or state-run corporations.
Abundant U.S. natural gas is just the first step. Booming domestic natural gas supplies have already displaced and defanged Russia's and Iran's grip on natural gas buyers. By significantly reducing American domestic requirements for imported liquefied natural gas (LNG), rising U.S. shale gas production has had the knock-on effect of increasing alternative LNG supplies to Europe, breaking down fixed pricing from entrenched monopolies. But this is just the beginning: Over the coming decade, the United States looks likely to overtake Russia and rival Qatar as a leading supplier of natural gas to international markets.
The geopolitical role of U.S. natural gas surpluses in constraining Russia's ability to use its energy as a wedge between the United States and its European and Asian allies should strengthen over time, to the extent that Barack Obama's administration stays the course with approving the construction of LNG export terminals. American unconventional oil and gas plays from Texas to Pennsylvania are also generating new surpluses of natural gas liquids, which are increasingly exported as transportation fuel or petrochemical feedstock to Europe, Asia, and elsewhere -- reducing demand growth for oil from the Middle East. And U.S. crude oil exports might also be possible some day, strengthening America's lead in market-related pricing for kingpin crude oil, much the way rising North Sea production did in the 1980s.