If the reality comes anywhere close to matching the hype, then the speeding of Russia’s national decline and the revival of America’s ideological authority will be among the transformative effects
As an earlier post suggested, the dramatic rise in U.S. natural gas production is one large reason why fears about America’s strategic decline may well be misplaced. The press is awash with articles about how the domestic abundance of low-cost energy promises significant economic gains. Fortune magazine carries an essay on how “the coming energy renaissance” will revive the U.S. manufacturing sector, a theme that is echoed in a new Citigroup report. Tyler Cowen, the economist who in last year’s The Great Stagnation argued that the good times are over, now foresees a coming era of export-based prosperity resulting, in significant part, from lower energy prices. Philip K. Verleger, Jr., a noted energy expert, anticipates an investment boom that creates millions of jobs across the U.S. economy.
Some commentary has dealt in a glancing way about how energy self-sufficiency will lessen America’s fraught profile in the Middle East and how the possibility of the United States becoming a major gas exporter could transform world energy markets. But with some exceptions (see here and here), there has been little focus on how America’s pioneering of the shale gas revolution might reshape international politics and the global economy.
The future has a way of making fools of bold prognosticators, but perhaps at this point two tentative propositions can be advanced. The first is that America’s emergence as the world’s largest gas producer seals shut the coffin on Moscow’s great power aspirations. Russia is already facing a catastrophic demographic decline and its power prospects derive largely from revenue generated by oil and gas exports. The emergence of the United States as a low-cost energy supplier threatens to undercut the country’s long-time dominance of the European gas market, so much so that Vladimir Putin has started to take worrying notice.
Verleger points to an additional cause for Moscow’s concern. The shale revolution’s trailbreakers are nimble companies drilling on a vast number of low-cost sites, something at which expensive, state-owned energy behemoths like Gazprom – or for that matter, the China National Petroleum Corporation (CNPC) and the China National Offshore Oil Corporation (CNOOC) – cannot hope to excel. As Verleger puts it, “large energy companies fall flat on their faces every time they attempt such endeavors.”
This observation prompts a second thesis: The shale revolution will lead the way in restoring U.S. soft power. America’s reputational clout took a huge hit with the onset of the “Great Recession,” with some advising that the future now belongs to state-managed capitalism. Others maintain that a key element of China’s spectacular rise resides in a state-centric brand of economic management that presents a superior alternative to the Western free-market principles.
But if Verleger is correct about organizational limits, then CNPC and CNOOC cannot possibly hope to exploit the rich shale reserves China is thought to possess. This visible failure, juxtaposed with the plain success of agile, private-sector producers operating in the United States, will do much to burnish the luster of the Western model of liberal capitalism and its American exemplar.
As Niels Bohr and (more famously) Yogi Berra have observed, the future is a damn hard thing to predict. The rising excitement about shale gas might suddenly deflate and take its place in the rubbish bin of history along with recent jeremiads about “peak oil.” But if the reality does approximate the current hype, then the speeding of Russia’s national decline and the revival of America’s ideological authority will be among the transformative effects.
This commentary was originally posted on Monsters Abroad. I invite you to follow me on Twitter.
