The Effects of Fracking on US Energy Security
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Introduction
Hydraulic fracturing (“fracking”) is a novel method for extracting oil and natural gas that involves injecting highly pressurised water, sand and chemicals into shale rock deep beneath the Earth’s surface (Sica 2015; Holloway & Rudd 2013, p.xi). Commercially viable fracking techniques have been honed over the past two decades in the USA, and have proved to be an effective means by which “difficult to reach resources of oil and gas” can be exploited (BBC News 2013).
Fracking is generally agreed to have had a dramatic effect on the price of fossil fuels, leading some to declare a “fracking revolution” (Ruhl 2013). The Brookings Institute estimates that average US gas prices in 2013 were 47% lower than they would have been without fracking. This means that, overall, consumers of gas saved approximately $13 Billion in the period between 2007 and 2013 – a figure that is increasing exponentially as production of fracked fuel increases (Dews 2015).
As fracking was pioneered in the USA – a market recently described by McDonald (2014) as “account[ing] for practically all of the world’s commercial production” – this paper will base its outlook on the impact of fracking on US energy security. We will begin by looking at the potential opportunities presented by fracking, then turn to the domestic challenges before considering the global impact, which will be split into a critique of the geopolitics and an assessment of the environmental factors raised by the technique.
The potential of fracking
The United States Energy Information Agency estimates that there are approximately 7229 trillion cubic feet of recoverable shale gas reserves globally (EIA-ARI 2013). This figure is likely to increase significantly, given that during this study, the EIA surveyed just 46 regions in 41 separate countries (p.1). For comparison, the Oil and Gas Journal’s 2012 “Worldwide look at Reserves and Production” put the total figure of proven recoverable conventional gas reserves at 7074 trillion cubic feet; a figure already smaller than the potential of shale gas, and one that is likely to be dwarfed as further shale exploration yields new gas fields.
Although commentators such as Inman (2014) have called the predicted size of potential reserves of shale gas into question, the potential for independent energy production is obvious, and has already been hinted at by the American experience. Between 2005 and 2013, the USA reduced net imports from 10.9 billion cubic feet of natural gas, to just 4.8 billion cubic feet. Over the same period, the wholesale price of gas collapsed from a high of $8.79 to a low of $3.71. Some experts expect the USA to become a net exporter of natural gas as soon as 2018 (Oil and Energy Trends 2013). Chief economist and Vice President of BP, Christof Ruhl (2013), predicts that, in a short space of time, the USA will also replace Saudi Arabia as the world’s largest energy producer.
Although turbulence in the price of gas is not solely down to increased supply (and is presently exacerbated by a global economic slowdown), fracking has two important benefits for the energy security of countries with reserves of shale gas:
They are insulated from fluctuations in global price such as those found between 2005 – 2013; and
The risk of sudden, unexpected geopolitical events impacting on supply is greatly mitigated.
Similar potential benefits are open to other nations with reserves of shale gas, which perhaps explains why countries such as the United Kingdom, which could supply its entire gas needs for the next 50 years by extracting just 10% of its estimated reserves, are so keen to expand their onshore fracking activities (Cooper, Stamford & Azapagic 2014).
Domestic challenges of fracking
Fracking is not without its critics. In a major survey of media portrayals, Groat & Grimshaw (2012) found that two-thirds of stories across all forms of news media in the USA were negative. They go on to criticise the fact that that less than a quarter of all stories made any reference to scientific research on the issue. The UK, where the government has shown a commitment to developing fracking that could make it the second major economy to follow the lead of the USA, has seen major public objection to fracking, sparked in part by a number of earthquakes that were attributed to drilling activities (BBC News 2011). Others have highlighted drinking water contamination, air pollution, and limited regulation (meaning wells can be constructed on church grounds and schools) as major criticisms of fracking in the USA (Goldberg 2013).
Holloway & Rudd (2013 p.126) reject many of these criticisms, noting that no link had been found linking fracking to reports of groundwater contamination. They cite a major study by the University of Texas, which concluded that “many problems ascribed to hydraulic fracturing are related to processes common to all oil and gas drilling operations” and that “any reports of contamination can be traced to above-ground spills or other mishandling of wastewater produced from shale gas drilling, rather than from hydraulic fracturing” (Holloway & Rudd, p.126). These justifications seem disingenuous; the issues identified are a direct consequence of fracking, even if they are not unique to it as a form of energy extraction. Over 15 million Americans now live within a mile of an oil or gas well, a figure likely to skyrocket as more wells are constructed, especially if densely populated nations such as the UK commence drilling operations (Gold & McGinty 2013).
As fracking is a technology that brings production closer to communities, it is imperative that the industry do more to address these issues, rather than dismissing them as normal consequences of fossil fuel production. If they do not, they will fail to win over public opinion, which in turn could result in a hostile regulatory regime that could act as a major impediment on the proliferation of fracking worldwide, negating any positive effects on energy security.
The Geopolitical significance of fracking
It is not just the size of potential shale gas reserves that is significant; it is also their global distribution. Presently, Russia tops the current list of nations with proven gas reserves, closely followed by Iran, with Saudi Arabia, Turkmenistan and Venezuela all featuring in the top ten – all nations with questionable human rights records, or a history of animosity towards the USA (Oil and Gas Journal 2012). By contrast, China – with negligible traditional energy reserves – tops the list of technically proven shale gas reserves. Brazil, the USA, and South Africa also feature in the top ten of this list (EIA 2014). This means that fracking has an enormous potential to impact on global energy security.
Six out of the top ten companies in the world are involved in the energy sector, and the future of fracking could well impact on their long-term fortunes (Fortune 2014). Large exporters such as Saudi Arabia, Russia, and Venezuela depend on oil and gas exports for their security and standing in the world, and plan their foreign policies accordingly (Orttung & Overland 2011). Control of fossil fuel reserves has been a factor in many global territorial disputes, and is a major motivating factor behind US political and military involvement in the Middle East (Overland 2015).
Clearly then, any change to the existing status quo with regards to the production, import, and export of gas is going to have a profound impact on global politics and the future of global energy security. If the USA does indeed become a net exporter of energy, its strategic interest in the Middle East – where it has a huge military presence, and has been directly involved in two recent wars – is likely to wane (Index of US Military Strength 2015, p.117). Some nations that exert their foreign policy objectives through energy are likely to see their influence decline, while others will see potential for their security to improve.
European energy security
At present, relations between Russia, Europe and the USA are strained. As much as a quarter of the EU’s gas is imported from Russia, and nearly 80% of it has traditionally travelled in pipes through Ukraine (BBC News 2009). Successive disputes between Ukraine and Russia regarding payment for gas resulted in almost annual cut-offs in European supply over successive winters in the latter half of the decade, causing some governments to declare a state of emergency as schools and factories closed and people struggled to survive the freezing temperatures (Cendrowicz 2009). These cuts in supply were short-lived, but demonstrate how vulnerable European energy security is to geopolitical events beyond its control.
The overthrow of pro-Russian president in Ukraine, the Russian annexation of Crimea, consequent European sanctions, and a Ukrainian gas production base that is centred to the east where insurgent fighting continues to wreak its toll all point to major, continued threats to global energy security, and perhaps underline why European nations might want to reconsider their initial reluctance to pursue the option of fracking (Oil and Energy Trends 2014). It is clear that if predictions of shale gas reserves prove accurate, Russian influence on global energy security will be greatly diminished, and a new hierarchical relationship will develop.
It is also noteworthy that while Russian influence might decline, two other BRIC nations – China and Brazil – may step onto the stage as global players in the global energy market. Some observers have commented that this could accelerate the USA’s decline as a hegemonic superpower; however, with the alluring prospect of energy independence itself, fracking might actually help to revive American fortunes (Dunn & Mcclelland 2013).
Climate Change
Although fracking has the potential to guarantee energy security for many nations, while precipitating the decline of influence for some producers and hastening the rise of others, in the long term, it has the potential to be a retrograde step for energy security.
At a time when scientific consensus seems to be that the use of fossil fuels is adversely impacting on the economic and ecologic future of the planet, it seems unfortunate that fracking – with its promise of low cost energy independence – has been developed as a technology. The UK seems almost certain to miss its objectives under the Climate Change Act 2008 of reducing carbon emissions to 80% of 1990 levels by 2050 if it continues to pursue its policy of fracking (Cooper, Stamford & Azapagic 2014). Although carbon taxes could offset the economic consequences of climate change, the political hurdles to implementing such policies have proved challenging to date (Rabe & Borick 2012). Furthermore, carbon taxes will not mitigate against the physical consequences of climate change, which even by conservative ‘best case scenario’ estimates, is likely to exacerbate food and water security, result in more frequent ‘freak’ weather events, and mean a rise in sea levels by the middle of the century (Schneider et al 2007). These factors are likely to result in greater instances of conflict, as populations compete for increasingly scarce resources (Scott 2012). As such, the short term benefits to energy security that fracking could bring could eventually contribute to long term global instability as the more serious effects of climate change begin to take effect.
Conclusion
As we have seen, the fracking revolution has the potential to shake up the largely static hierarchical energy relationships that have existed since the end of World War Two. Nations such as the USA and the United Kingdom have the potential to become energy independent within a generation. Growing economies with limited traditional energy reserves such as China have the potential to become energy producers, which, until now, they have largely been excluded from. For the winners, a future of energy independence beckons, which in turn means greater energy security and greater global security.
Although there are many benefits, the impact of climate change cannot be ignored. Fracking provides cheap domestic fuel, which in turn means that the point in time at which it becomes economically viable for societies to switch to renewable sources of energy disappears further into the future. This means that, long term, fracking could contribute to increased political volatility and uncertainty, which in turn could result in reduced global energy security.
Ultimately, fracking could prove to be a false economy.
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