A pumpjack brings oil to the surface in the Monterey Shale, California, April 29, 2013.
Lucy Nicholson / Courtesy Reuters

Only five years ago, the world’s supply of oil appeared to be peaking, and as conventional gas production declined in the United States, it seemed that the country would become dependent on costly natural gas imports. But in the years since, those predictions have proved spectacularly wrong. Global energy production has begun to shift away from traditional suppliers in Eurasia and the Middle East, as producers tap unconventional gas and oil resources around the world, from the waters of Australia, Brazil, Africa, and the Mediterranean to the oil sands of Alberta. The greatest revolution, however, has taken place in the United States, where producers have taken advantage of two newly viable technologies to unlock resources once deemed commercially infeasible: horizontal drilling, which allows wells to penetrate bands of shale deep underground, and hydraulic fracturing, or fracking, which uses the injection of high-pressure fluid to release gas and oil from rock formations.

The resulting uptick in energy production has been dramatic. Between 2007 and 2012, U.S. shale gas production rose by over 50 percent each year, and its share of total U.S. gas production jumped from five percent to 39 percent. Terminals once intended to bring foreign liquefied natural gas (LNG) to U.S. consumers are being reconfigured to export U.S. LNG abroad. Between 2007 and 2012, fracking also generated an 18-fold increase in U.S. production of what is known as light tight oil, high-quality petroleum found in shale or sandstone that can be released by fracking. This boom has succeeded in reversing the long decline in U.S. crude oil production, which grew by 50 percent between 2008 and 2013. Thanks to these developments, the United States is now poised to become an energy superpower. Last year, it surpassed Russia as the world’s leading energy producer, and by next year, according to projections by the International Energy Agency, it will overtake Saudi Arabia as the top producer of crude oil.

Much has been written lately about the discovery of new oil and gas deposits around the world, but other countries will not find it easy to replicate the United States’ success. The fracking revolution required more than just favorable geology; it also took financiers with a tolerance for risk, a property-rights regime that let landowners claim underground resources, a network of service providers and delivery infrastructure, and an industry structure characterized by thousands of entrepreneurs rather than a single national oil company. Although many countries possess the right rock, none, with the exception of Canada, boasts an industrial environment as favorable as that of the United States.

The American energy revolution does not just have commercial implications; it also has wide-reaching geopolitical consequences. Global energy trade maps are already being redrawn as U.S. imports continue to decline and exporters find new markets. Most West African oil, for example, now flows to Asia rather than to the United States. And as U.S. production continues to increase, it will put downward pressure on global oil and gas prices, thereby diminishing the geopolitical leverage that some energy suppliers have wielded for decades. Most energy-producing states that lack diversified economies, such as Russia and the Gulf monarchies, will lose out, whereas energy consumers, such as China, India, and other Asian states, stand to gain.

The biggest benefits, however, will accrue to the United States. Ever since 1971, when U.S. oil production peaked, energy has been construed as a strategic liability for the country, with its ever-growing thirst for reasonably priced fossil fuels sometimes necessitating incongruous alliances and complex obligations abroad. But that logic has been upended, and the newly unlocked energy is set to boost the U.S. economy and grant Washington newfound leverage around the world.

Ib Ohlsson

THE PRICE IS RIGHT

Although it is always difficult to predict the future of global energy markets, the main effect the North American energy revolution will have is already becoming clear: the global supply of energy will continue to increase and diversify. Gas markets have been the first to feel the impact. In the past, the price of gas has varied greatly across the three largely distinct markets of North America, Europe, and Asia. In 2012, for example, U.S. gas prices stood at $3 per million BTU, whereas Germans paid $11 and Japanese paid $17.

But as the United States prepares to generate and export greater quantities of LNG, those markets will become increasingly integrated. Already, i