The geopolitical impact of the shale revolution

Exploring consequences on energy prices and rentier states

Journal article (2016)

Authors

Willem L. Auping Policy Analysis - TPM
E. Pruyt Policy Analysis - TPM
Sijbren de Jong The Hague Centre for Strategic Studies
J.H. Kwakkel Policy Analysis - TPM
Research Group
Policy Analysis (TPM) (TU Delft)
Copyright: © 2016 Willem L. Auping, E. Pruyt, Sijbren de Jong, J.H. Kwakkel
DOI: https://doi.org/10.1016/j.enpol.2016.08.032
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Published Date

2016

Language

English

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Faculty

Technology, Policy and Management

Department

Multi Actor Systems

Research Group

Policy Analysis

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.