Abstract
While the shale revolution was largely a US’ affair, it affects the global energy system. In this paper, we look at the effects of this spectacular increase in natural gas, and oil, extraction capacity can have on the mix of primary energy sources, on energy prices, and through that on internal political stability of rentier states. We use two exploratory simulation models to investigate the consequences of the combination of both complexity and uncertainty in relation to the global energy system and state stability. Our simulations show that shale developments could be seen as part of a long term hog-cycle, with a short term drop in oil prices if unconventional supply substitutes demand for oil. These lower oil prices may lead to instability in rentier states neighbouring the EU, especially when dependence on oil and gas income is high, youth bulges are present, or buffers like sovereign wealth funds are too limited to bridge the negative economic effects of temporary low oil prices.
Highlights
In recent years, a spectacular rise in natural gas extraction capacity from unconventional resources has dramatically changed the US’ energy landscape, turning the country into a natural gas exporter
In this paper we investigated potential indirect effect of the US’ shale revolution on state stability of rentier states
We built and used two System Dynamics (SD) simulation models, one for the global energy mix consisting of six primary energy sources, and one to assess the impact of oil and gas prices on intra-state stability
Summary
A spectacular rise in natural gas extraction capacity from unconventional resources has dramatically changed the US’ energy landscape, turning the country into a natural gas exporter. This development is often referred to as the ‘shale gas revolution’ and was made possible by the process of hydraulic fracturing, or ‘fracking’. The shale revolution was far largely an US’ affair, as outside of Northern America hardly any commercial exploitation of shale resources took place. The impact of the shale revolution on global energy markets is the starting point of this research
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