Reexamining the United States’ shale gas success: Is Europe letting the fox in the henhouse?

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Policy Paper

By the end of 2013, shale gas in the United States rapidly grew to account for 40% of total natural gas production. It generated great enthusiasm among politicians and industry leaders alike, who lauded the shale gas boom as a part of a domestic energy renaissance that promises to raise the Unites States to prominence among the world’s foremost fossil fuel producers. New developments in hydraulic fracturing (fracking) technology that make it possible to extract the resources of shale gas from rock formations have significantly driven down the domestic natural gas prices, as well as reduced US dependence on natural gas imports. According to the International Energy Agency (IEA), this increased US domestic natural gas supply also enhances the United States’ chances of becoming a net exporter of natural gas by 2020.1 Recently, the US Department of Energy approved a liquefied natural gas (LNG) export facility to be built by 2017, located on the Chesapeake Bay in Maryland, which is expected to export up to 2.2 billion cubic meters/day.2 While increasing supply currently keeps the price of natural gas in the United States far lower than in other regions across the globe, the domestic price might increase once the exports of LNG are launched. Electricity prices in Europe are about twice as high as in the United States, while the gas prices are around three times as high. This energy price-gap puts greater pressure on European industry, and makes fracking a controversial issue on both sides of the Atlantic.

Oil and gas industry’s main arguments in favor of shale gas development are the rapidly increasing number of jobs within the unconventional gas sector, as well as natural gas’ role as a bridge fuel towards a low carbon economy. Although these claims seem to be favorable for the United States and the global climate, as well as the European countries willing to embrace fracking technologies, such positive arguments touted by natural gas proponents are highly overestimated.