Energy shift: decline of easy oil and restructuring of geo-politics

Abstract

This paper critically assesses the geopolitical and geo-economic impact of novel fuel resources on both resource exporters and importers. Presently, very strong political and economic forces drive the utilisation of domestic, unconventional oil and gas recovery in the West as these enhance energy security and ease balance of payment issues. The additional capacity generated by this trend has, supported by other effects such as Saudi Arabia’s decision to maintain current production, triggered a significant reduction of oil prices. Consequently, it is now oil exporters that struggle with the balance of payment issues and often these countries base their fiscal budget completely on fossil fuel revenues. In fact, these unconventional resources help turn the tide while oil exporters are now politically significantly weakened due to the increased energy sufficiency of the West. The catch is that the extraction of unconventional types of oil has many environmental implications. So, internalising the environmental externalities have to be considered. This paper, therefore, assesses, next to geopolitics and geo-economics, the environmental implications of this trend.