Sunday, 10 March 2013

Where does the U.S. shale gas revolution leave Europe?

Shale gas drilling in Appalachia.
(image by Meredithw at en.Wikipedia)

A research note by Morgan Stanley summarizes the benefits of the shale gas revolution for the U.S.:
The new technology is unlocking oil and shale gas resources, spurring economic activity and giving industry a competitive edge with less expensive gas and electricity prices.

These developments could lead to the industrialization of the U.S. economy and could deliver sustainable growth, Morgan Stanley said in a research note on Wednesday.
With the help of cheap energy, manufacturing will pick up and move down the ladder to capturing the production of less "sophisticated" goods (computers, fabricated metals and automobiles) currently manufactured in emerging nations. As a result, the United States will likely compete with emerging markets for market share rather than being a consumer, Morgan Stanley said.
"As the manufacturing renaissance takes hold in the U.S., the move down the value-added ladder in the U.S. is likely to clash with China's need to further increase the sophistication of its manufacturing base," it said. 
And as the bank details, China needs to move up that ladder to not only produce medium-term growth but to protect against economic stagnation, the "middle-income trap" and move from an emerging to a developed market.-- 
A continued fall in U.S. oil imports means North America could become a net oil exporter by around 2030, according to the IEA, and the United States could become almost self-sufficient in energy by 2035. 
And the U.S. shale gas revolution will not only impact on China
"U.S. reindustrialization will likely challenge Russia's presence in steel, chemicals and industries to support that very renaissance," it said.
The Morgan Stanley research note does not seem to mention where the U.S. shale gas revolution leaves Europe. But you do not have to be a financial expert in order to understand what is in store for the EU
The deadly combination of a failed energy policy (read: taxpayer subsidized, ineffective and costly wind and solar energy) and a recession generating failed common currency cannot result in anything else than an accelerated marginalization of Europe.
The views of Peter Altmaier, Germany's "conservative" environment minister, exemplify what is wrong with the European approach:
One one hand, Altmaier seems to understand the devastating costs (for consumers) of the German energy transition policy:
"Energy transition could end up costing up to a trillion euro"
On the other hand, the same Altmaier, echoing Greenpeace and other envirofundamentalist NGOs (and Russia's Gazprom) has this to say about the shale gas revolution: 
"For now I cannot see that fracking is acceptable anywhere in Europe. This also applies to Germany"
Germany's export successes have been considerable during the last few years, but there are already clear signs that the German economy is joining the rest of Europe in the downward spiral:
In Europe, the decline in industrial production previously observed in a few countries of the European Union spread across the continent. Industrial production systematically decreased there in all four quarters of 2012, UNIDO reported.
Manufacturing output in the fourth quarter fell by 3.9 per cent in France, 2.9 per cent in Germany, 6.9 per cent in Italy and 1.8 per cent in the United Kingdom.

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