11/01/2024

America Can’t Do Without Fracking

The Wall Street Journal | Daniel Yergin | Oct. 30, 2024

America Can’t Do Without Fracking

The Wall Street Journal | Daniel Yergin | Oct. 30, 2024

This year’s presidential race features an oddity: a discussion about a ban on fracking. What’s striking is that such a conversation is happening at all. This talk takes participants through the Wayback Machine to the first two decades of this century, when hydraulic fracturing and horizontal drilling—together known as fracking—came to public attention. The U.S. was then the world’s largest importer of oil. Today it is energy-independent with, S&P Global estimates, more than 70% of its oil and more than 80% of its natural gas produced through fracking. The process has become essential to the nation’s energy supply and can’t be eliminated.

Not long ago the prospect of U.S. energy independence seemed fanciful. For more than four decades every president aspired to it, but their goal seemed unattainable. Many observers considered the U.S. destined to grow more dependent on imports. In recent years, however, America has achieved energy independence on a net basis. U.S. output is closing in on 13.5 million barrels of crude oil a day, exceeding that of perennial big producers Saudi Arabia and Russia by several million barrels per day. Add what are called natural-gas liquids, and the U.S. produces around 20 million barrels per day.

Textbooks used to hold that commercial production of shale was impossible. Innovation and investment over decades have proved otherwise. Yet despite this progress, many continue to underestimate how transformative shale oil has been for the U.S. economy and the American way of life.

Consider a concrete example. My firm estimates that battery-powered and plug-in hybrid electric vehicles will account for about 2% of the U.S. on-road light-vehicle fleet in 2024. If fracking were banned, the U.S. would need to import extraordinary amounts of oil to fuel our gasoline- and diesel-powered cars. In 2008, before shale-oil production began in earnest, the net bill for importing petroleum was $388 billion—more than 40% of the total merchandise trade deficit. Today the same bill, by contrast, is virtually nothing.

There would be other costs to a phase-out of fracking. If the U.S. were to start importing again, the price of oil would doubtless rise, as we would be forced to compete for supplies with countries such as China, which is estimated to import more than 70% of its petroleum. The U.S. also exports a large amount of liquefied natural gas, mostly produced from shale. Without it, LNG’s positive effect on the trade balance would disappear too.

The economic effect is clear amid geopolitical turmoil. In previous decades, such upheavals as Ukraine’s war against Russia and Israel’s war with Iranian proxies would have spiked global prices. In recent years the scale of U.S. production has helped offset any such surges. This stabilizing effect would become even more crucial if an expanding Mideast war targeted major regional oil facilities, threatening to drive prices up further still.

Shale influences more than America’s prices or balances of payments; it also enhances our geopolitical strength. One of Vladimir Putin’s several miscalculations in invading Ukraine was that he could use energy to shatter the European coalition supporting Kyiv. His strategy failed because large supplies of LNG—bolstered by increased exports from Norway—compensated for the loss of Russian gas. Nearly half of the European Union’s LNG supply in 2023 consisted of U.S.-sourced LNG, mostly processed from shale gas, making the U.S. its largest supplier. Were that supply to be constrained, our allies’ security would be severely compromised and a significant feature of the North Atlantic Treaty Organization’s arsenal eliminated.

The same dynamic applies for U.S. allies in the Pacific. Japan and South Korea have come to rely on U.S. energy exports, which have proved essential for diversifying their supply and strengthening their security. Losing that contribution would make them more vulnerable, reduce their confidence in the reliability of the U.S., and likely push them toward importing from Russia.

A ban on fracking would be both misguided and destructive for the U.S. and its allies. Recurrent out-of-touch debates on the topic need to be tabled in light of a central fact: Shale has become crucial to the U.S. economy and global energy security. It’s here to stay.

Mr. Yergin, vice chairman of S&P Global, is author of “The New Map: Energy, Climate and the Clash of Nations.”