Good news about energy is rare. Energy use and its cost are rising worldwide, most countries remain dependent on oil imports, and little progress has been made toward curbing climate change. So the world should take notice of the recent dramatic increase in estimates of unconventional sources of natural gas in North America and elsewhere, perhaps the greatest shift in energy-reserve estimates in the last half century. In the past few years, thanks to technological advances, vast amounts of natural gas -- particularly gas trapped in underground shale basins -- have become economically viable.
This development is an unmitigated boon for consumers interested in affordable energy, environmentalists looking for energy sources that emit less carbon dioxide than either oil or coal, and governments that hope to reduce the political and market power of today's major oil- and gas-producing countries. The prospects for a greatly increased global supply of natural gas have dramatic implications for both international energy markets and the energy policies of individual nations. Over time, natural gas use will expand into the power sector and may then displace oil in the transportation and chemical sectors. As more natural gas becomes available and more of it is traded, the regional gas markets that exist today may well merge into a more integrated and open international gas market with a single price.
Countries that import natural gas should anticipate more competing sources of it, which will lower prices and reduce concerns about the security of the gas supply. No longer, it seems, will the world be dependent on a few nations -- Iran, Qatar, Russia, Saudi Arabia, and Turkmenistan -- that control the bulk of conventional natural gas reserves. Countries that produce natural gas will need to adjust to lower revenues from natural gas exports; for some of them, the adjustment may be quite severe and potentially destabilizing. As gas acts as a substitute for oil, demand for oil will fall, putting downward pressure on oil prices. This will lessen, but