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Shale: The Gift That Keeps on Giving…to America

The US shale boom has been great for the energy industry, obviously, but it has also produced ripple effects throughout other sectors of the economy. In particular, the boom has been a boon for the many chemical companies that rely on fossil fuels for production. In fact, it’s been such a game changer that many chemical companies are relocating from the Middle East to the United States. The Financial Times reports:

Middle East energy producers have long bet on petrochemicals as a way to diversify their economies away from reliance on oil and gas revenue.

Over the past decade, rather than simply exporting oil, Gulf companies such as Saudi Arabian Basic Industries (Sabic), the world’s largest petrochemicals maker, have built plants that transform the raw materials into chemicals and plastics, which in turn can spawn new industries crucial for job creation in a region where unemployment is about twice as high as the rest of the world.

Prices of NGLs – natural gas liquids that are stripped from the gas and used as feedstock for petrochemicals – are now lower [in the United States] than in Saudi Arabia, according to a report published in October by PwC, resulting in an industrial renaissance in the US.

This is disturbing news for the petrostates of the Middle East. They had long seen petrochemicals as one way to diversify their one-dimensional economies (albeit rather lame one given that the industry relies so heavily on the by-products of fossil fuel production). But with much of the production moving to America, these countries are going back to the drawing board. Saudi Arabia is focusing on solar, while countries like Qatar are looking to expand natural gas production to compete with the new energy-rich America.

It’s hard to overstate how much shale has revolutionized the global energy picture.

[Oil rig image courtesy of Shutterstock]

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  • Luke Lea

    It’s hard to overstate how much shale has revolutionized the global energy picture.

    You mean is revolutionizing.

  • rheddles

    The petrostates will still have the same dysfunctional culture. This just means they’ll return to nomadism sooner.

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