While the US is turning to smaller cars and has restored domestic oil production to 1994 levels I see no way that country can be self sufficient in oil and gas by 2040. The mistake is to extrapolate a blip into a long term trend. With the help of China and India we will have squandered the world's hydrocarbon resources by then and there will be no alternative to zero carbon energy and using less. Meanwhile we will have added tens of billions of tonnes of CO2 to the atmosphere.

For detailed analysis see any of the daily articles in The Oil Drum website. They cover decline rates in 'fracked' wells and US reliance on Canadian tar sands. I think in hindsight these projections will be regarded as wishful thinking that mask underlying anxiety.

Ah, The Shale Ponzi........ because that's what it is: a Ponzi scheme, aimed at gathering in sucker-investors to boost share prices of oil and gas companies, with the hope that some miracle will occur to make financially broke societies capable of paying three or four times the price for oil and gas than their infrastructure for daily life was set up to run on, back when it seemed to be running OK. This is just not going to happen.

Let's start with shale gas. The gas is there in the "tight" rock strata, all right, but it is difficult and expensive to get out. The process is nothing like the old conventional process of sticking a pipe in the ground and getting "flow." It's not necessary to go into the techno-details, but to give you a rough idea, it takes four times as much steel pipe to get shale gas out of the ground.

As a result of drilling the gas plays as if there was no tomorrow, the producers created a huge glut for a brief time. They screwed their own market long enough to wreck their business model. Unlike oil, methane is much more difficult to export -- it requires expensive tankers, compression and refrigeration of the gas to a liquid, seaboard terminals to accomplish all that (which the US don't have), so there was no way to fob off the surplus gas onto other nations. The domestic market was overwhelmed and there was no more room to store the stuff. So, for a few years the price sank and sank until it was under $2 a unit by 2011. Since shale gas production is just flat-out uneconomical at that price, the companies engaged in it began to suffer hugely.

In the process of all this a pattern emerged showing that shale gas wells typically went into depletion very quickly after year one. In fact, most of them produce virtually nothing within two years.... So all of the activity from 2004 to 2011 was a production bubble, aimed at proving what a bonanza shale gas was to stimulate more investment. It required a massive rate of continuous drilling and re-drilling just to keep the production rate level -- to maintain the illusion of a 100-year bonanza -- and that required enormous quantities of capital.

After 2011 the rig count began to drop and of course production levelled off and the price began to go up again. As I write the price is $3.31 a unit, which is still way below the level where natural gas is profitable for companies to produce -- say, above $8. The trouble is, once the price rises into that range it becomes too expensive for many of its customers, especially in a contracting economy with a shrinking middle class, falling incomes, and failing businesses. So what makes it economical for the producers (high price) will make it unaffordable for the customers (no money). Because of the complex nature of these operations, with all the infrastructure required, and all the money needed to provide it, the shale gas industry will not be able to go through more than a couple of boom / bust cycles before it begins to look like a fool's game and the big companies throw in the towel...... let alone all the small ones!

And I haven't even mentioned the "fracking" process, which is hugely controversial in regard to groundwater pollution, and a subject which I will not elaborate on here, except to say that there's a lot to be concerned about.

Everything about shale gas is true for shale oil with some exceptions. One is that the price of oil did not go down when US shale oil production rose. That's because the amount of shale oil produced -- now about 900,000 barrels a day -- cannot keep up with the depletion in regular oil, and world consumption shifting to China and the rest of Asia, and the declining ability of the world's exporters to keep up their levels of export oil available to the importers because of of the growth of their own domestic usage. The US still import 42% of the oil it uses every day.

Nothing to see here but another bubble about to burst........

Barry,

Thanks for a very informative article. One point which was not covered was the implications of adding the emissions from exploiting unconventional reserves of oil and gas for our overall carbon budget.

If one accepts the work of Meinshausen, Allen and others regarding how much more carbon dioxide we can emit to have a 75% chance of limiting warming to 2 degrees Celsius (565 Gt), then existing conventional oil and gas reserves by themselves, without coal, are enough to exceed this budget by around 170 Gt.

Given that conventional reserves are likely (I am making assumptions here) to be able to be exploited more cheaply, give a higher energy return on energy invested, and have a smaller environmental impact than exploiting unconventional reserves, why would it make sense to go after unconventional reserves?

It seems to me that one of the answers to the question in your title, "How is US non-conventional fossil fuel affecting the rest of the world?", is that it will ensure global warming ultimately exceeds 2 degrees Celsius by a large margin, with all that implies.

Many of the comments are correct about the impact of the US's reluctance to address climate change and their madness in pursuing fracking as a solution. It appears most likely to be a disaster in the making. What hasn't been addressed is the impact on agricultural production and I would direct readers to George Monbiot's article in the Guardian Weekly, October 16, 2012. Starvation on a planetary scale awaits, but such a scenario doesn't figure into the calculations of the economists. Nor does it come into the caluclations of Australia's political leaders. It should.

Excellent article and comments,especially those by Michel Stasse.Could Barry and Michel comment on the following questions ?

To what extent is the US shale gas bubble supported by US govt subsidies under so-called self-sufficiency and energy security policies?
To what extent are US-led trade embargoes against Iran backed by US energy companies when the ostensible motives are to punish the Iranian government and deter an Israeli military attack on Iran?
To what extent is Australia's csg gasrush plus pressure for processing plants and other infrastructure motivated by a "get in while the going's good" before The Us and Indonesia start exporting?

Ray Pierrehumbert, Professor in Geophysical Sciences at the University of Chicago is also skeptical of the "Saudi America" claims.

He reports on a discussion at the last American Geophysical Union conference.

http://www.slate.com/articles/health_and_science/science/2013/02/u_s_shale_oil_are_we_headed_to_a_new_era_of_oil_abundance.single.html#pagebreak_anchor_2

This is the punchline.

"Does all the new American oil give us yet another way to fry ourselves? At 0.1159 metric tons of carbon per barrel of oil, the oil in Bakken and Eagle Ford amounts to a carbon pool of 81 gigatons, and the Green River shale adds up to 232 gigatons. Given that burning an additional 500 gigatons of fossil fuel carbon is sufficient to commit the Earth to a practically irreversible warming of 2 degrees Celsius, these are scary numbers. However, if oil analysts such as those speaking at the American Geophysical Union are right, almost all of this oil will remain inaccessible. In that case, coal—which certainly contains enough carbon to bring us to the danger level and probably much beyond—remains the clear and present threat to the climate, and the fight to leave as much coal as possible in the ground remains the front line in the battle to protect the climate."

US non-conventional petroleum and gas production is already lowering energy costs in America and helping to power a manufacturing renaissance. It is also altering America's international strategic role in a positive way. Washington now has significantly more room for manoeuvre in a number of regions. But the major impact will not come from US production; it will come from the spread of US technologies.
It will be NCP and gas production in other areas, particularly China, Poland and the Ukraine - which will change the face of the global hydrocarbon industry. Shell is investing 10 Billion US in the Ukraine - a development which, if successful, will undercut Europe's growing dependence on Gazprom. This will have a significant impact on resource-reliant Russia. China, which may have the world's largest resources, will likely become a major producer as well as consumer.
Perhaps the most important impact of these technologies is to reduce global reliance on the few countries which have the majority of conventional resources. Gas is the transition fuel and we now have an extra few decades to develop truly competitive renewable energy technologies.