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overall world economy on which America’s economy and well-being very much
depend is in turn still deeply dependent upon imported energy, of which the major
Middle Eastern producers are and will remain the main market setters (Author’s
interview with Ambassador Ross Wilson 2017).
Shale Gas and Iran Sanctions
The energy revolution provides America with a powerful geo-mechanical tool.
Harvard University professor Martin Feldstein writes that these countries depend
heavily on their oil revenues to support their government spending, and therefore
have difficulty in implementing populist programs for public support. These countries make instability in the international system. Russia sees the greatest blow. The
effect of Shell Oil on the abolition of Russia’s energy resources and on Russian gas
in the Crimea and Ukraine hurts. Political instability in Russia will be due to lower
oil prices. This revolution is affecting the Gulf states, especially Saudi Arabia, and
has removed social welfare programs in providing public services to Iran’s nuclear
program and its regional capabilities and will undermine Iran’s desire to increase oil
prices. And may well lead to improved relations between China and Russia. Of
course, regional friends such as Japan, South Korea, and India will depend on cheap
oil and gas, and gas will be at the lowest prices in these countries (D. Blackwil and
M. Harris 2016:32).
The Challenges Toward Development of Shale Gas
The challenge of developing and commercializing unconventional sources is to discuss the cost-effectiveness of producing and extracting such resources. Many
researchers believe that the extraction of abnormal resources is only cost-effective
in the face of rising oil prices, and in the event of a decline in oil prices, production
is not uncommonly costly production. For example, along with an increase in nonconventional production, annual spending on shale gas production has been exponentially expanding from $5 million in 2006 to $80 million in 2013. Therefore,
increasing capital expenditure is an unconventional production challenge. Full
development of a shale source to bring its output to a constant level costs $50 to $70
a barrel (compare with the very low cost of conventional Gulf oil production). That
means a shale source generates 200,000 barrels of oil a day, with capital costs
between $10 billion and $15 billion. According to Hart’s estimation, oil production
from shale resources will be profitable, taking 10% discount rates at 50–60 dollars
per barrel (Madani 2014:9).
While low oil prices have dramatically reduced the price of gasoline for Americans, this
would have less overall direct impact on the US economy, given the increased efficiency of
engines. At the same time, low rates will have a negative effect on major oil and gas outputs
5 US Energy Diplomacy Under the Obama Administration
overall world economy on which America’s economy and well-being very much
depend is in turn still deeply dependent upon imported energy, of which the major
Middle Eastern producers are and will remain the main market setters (Author’s
interview with Ambassador Ross Wilson 2017).
Shale Gas and Iran Sanctions
The energy revolution provides America with a powerful geo-mechanical tool.
Harvard University professor Martin Feldstein writes that these countries depend
heavily on their oil revenues to support their government spending, and therefore
have difficulty in implementing populist programs for public support. These countries make instability in the international system. Russia sees the greatest blow. The
effect of Shell Oil on the abolition of Russia’s energy resources and on Russian gas
in the Crimea and Ukraine hurts. Political instability in Russia will be due to lower
oil prices. This revolution is affecting the Gulf states, especially Saudi Arabia, and
has removed social welfare programs in providing public services to Iran’s nuclear
program and its regional capabilities and will undermine Iran’s desire to increase oil
prices. And may well lead to improved relations between China and Russia. Of
course, regional friends such as Japan, South Korea, and India will depend on cheap
oil and gas, and gas will be at the lowest prices in these countries (D. Blackwil and
M. Harris 2016:32).
The Challenges Toward Development of Shale Gas
The challenge of developing and commercializing unconventional sources is to discuss the cost-effectiveness of producing and extracting such resources. Many
researchers believe that the extraction of abnormal resources is only cost-effective
in the face of rising oil prices, and in the event of a decline in oil prices, production
is not uncommonly costly production. For example, along with an increase in nonconventional production, annual spending on shale gas production has been exponentially expanding from $5 million in 2006 to $80 million in 2013. Therefore,
increasing capital expenditure is an unconventional production challenge. Full
development of a shale source to bring its output to a constant level costs $50 to $70
a barrel (compare with the very low cost of conventional Gulf oil production). That
means a shale source generates 200,000 barrels of oil a day, with capital costs
between $10 billion and $15 billion. According to Hart’s estimation, oil production
from shale resources will be profitable, taking 10% discount rates at 50–60 dollars
per barrel (Madani 2014:9).
While low oil prices have dramatically reduced the price of gasoline for Americans, this
would have less overall direct impact on the US economy, given the increased efficiency of
engines. At the same time, low rates will have a negative effect on major oil and gas outputs
5 US Energy Diplomacy Under the Obama Administration