If a public poll was conducted amongst Western populations and the question posed:

“What is the single biggest change to the world order in the last 10 years?”

Among the top answers would be

Financial crisis
Austerity and cuts to entitlements
Rise of China
Ending of Iraq / Afghan wars
Iran / North Korea – nuclear capability

All are good answers, none are the number 1 (Iran is probably number 2 though).

That was then

To review some history and without getting too controversial it is hard to believe that the decision to invade Iraq after 9/11 was not at least partly motivated by the desire to establish a greater presence in the world’s hydro carbon heartland.

The US, in 2000, imported huge amounts of oil; most of the countries exporting to it were not allies (even in Saudi Arabia there was significant anti American rhetoric outside of the ruling family; indeed Osama Bin Laden was a Saudi).

The Republicans (George W Bush) had continually highlighted in the Presidential election campaign the urgent need, as a matter of National Security, to address the US vulnerability to disruptions in energy supply.

In retrospect it is indeed ironic that Bush, a Texas oil man, funded by oil company campaign contributions defeated the Democrat candidate Al Gore.

New President Bush quickly declared war on a Middle Eastern oil rich country (Iraq); the future Nobel Laureate Gore wrote and spoke after his loss of the “Inconvenient Truth”, of the hydro carbon, greenhouse gas, global warming danger, and greatly raising ecological awareness.

Many historians and economists at the time were warning that as the world reached and passed “peak oil” (the point at which oil supply and production started to fall) the geo-political ramifications would be profound.

They reasoned that all major economies depended for their energy provision on hydro carbons; if there was a growing shortage, if prices ballooned, then nations would be faced with enormous pressures to secure supplies, ultimately this could only be achieved by force.

The whole situation could be summed up by the conversation between a pessimist and an optimist.

The pessimist:

“You know, I don’t think the situation can possibly get any worse”

The optimist:

“Oh, I think it definitely can.”

This is now

It is remarkable that only a decade after 9/11, only 10 years after US foreign policy was fixated on its perceived need to secure energy resources, they no longer give it much thought.

A child went to church with his grandfather and afterwards asked him.

“Granddad, God has to listen to a lot of sad and serious stuff, how can we cheer him up?”

The granddad thought for a moment and replied.

“Don’t worry, people make him laugh all the time.

They tell him of their plans for the future.”

Over the past few years it has become clear that the US has the largest Natural Gas resources on the planet (which can be harvested through the new drilling technique called fracking) and that for the foreseeable future (50 plus years is estimated) it will not only be energy self-sufficient but will be a large if not the largest net exporter of energy to the rest of the world.


The single most profound change to the world order is ……………………

*US energy independence*


The first thing to say here is that recounting history is a lot easier and more accurate than predicting it.

Having said that, to give an idea of the advantage that the US now possesses is simply to know that their current cost per unit of gas produced is $4, Japan imports the same unit at $14 and the European cost is $8.

So, undernoted are some of the elements of the current status quo which will be changing.

The US will convert vehicles to gas power (cars, trains and trucks) hugely reducing their need to import oil.

They will convert power generation from coal to gas, cheaper power will lower industrial manufacturing costs as those of the rest of world increase, and this will boost US competitiveness and employment.

The US will build pipelines and liquefaction plants to enable them to export, the infrastructure build will be economically stimulating and the revenue from these exports will help them to reduce their balance of payments deficit (which requires them to issue less Treasury notes to fund it and at lower interest rates which saves them money).

The dollar will strengthen as the US becomes a commodity backed currency and it ceases to run a large balance of payments deficit.

The US will focus less on being the world’s self-appointed democratic police force (military presence), this was anyway a role it could no longer afford and it will have much less vested interest in Middle Eastern politics when it doesn’t need the oil.

It’s unlikely the US will go to war again in the Middle East anytime soon (unless it is to stop Iran and its nuclear capability, this it may well need to do but so will the rest of the World).

The slow burn

It is interesting that unless one had really been paying attention to articles and studies, none of which come remotely close to front page news, that this entire development and the likely consequences will not have registered.

This is similar to the early reports of the invention of the Internet which took a decade to reach the zeitgeist, the single most transformatory invention since the atomic bomb.

The reason for this is that the natural gas story is a slow burn (excuse the pun) the effects will be gradual and incremental with no single defining act or action, but cumulatively, like the Internet, it will change most things.

NOTE: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. This is not a recommendation to buy any product or service including any share or fund mentioned. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.