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After Shale

To ignore geothermal would inflict a substantial wound, one that would be difficult to heal.

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Credit: Popular Voice

The shale boom is the overlooked revolution of the early 21st century. Despite the indifference of the mainstream media and the ignorance of many politicians, shale brought America energy self-sufficiency. It has provided cheaper oil and gas, slowed deindustrialization, reduced dependence on coal, and freed America from many geopolitical constraints. It has allowed the U.S. to support its allies and contributed to the development of technology that could spark a new energy revolution. Anyone who overlooks this example of dynamic cooperation between the private sector and smart government policy is disregarding the conditions of American sovereignty.

If maintaining the competitiveness of U.S. industry and lowering energy costs for consumers seem straightforward benefits of the shale boom, the geopolitical benefits are altogether underappreciated. It is worth recalling, however, the price the U.S. paid for its dependence on oil imports.


Until the late 1960s, America was able to secure a sufficient supply on its own. However, growing demand meant that domestic extraction was no longer enough, and the U.S. had to turn to overseas sources. Meanwhile, Saudi Arabia and OPEC became stronger and more assertive, upsetting the global balance of oil power. The U.S. experienced this firsthand when it chose to support Israel with airlifts during the Yom Kippur War. The embargo imposed on America by Middle Eastern oil producers dealt a blow to the economy and triggered a discussion about energy independence. However, as Victor McFarland points out in Oil Powers: A History of U.S.-Saudi Alliance, “even as presidents from Ford to both Bushes emphasized the importance of ‘energy independence,’ the country had in fact become more and more dependent, particularly on the Middle East, and more and more embroiled in the region’s politics.” Successive administrations announced their plans to achieve self-sufficiency, yet none of them put forth a solution that would truly address the problem. The national interest suddenly seemed inextricably tied to the distant Middle East.

Washington thus had to foster close relations with Saudi Arabia, the largest producer among OPEC members. Amid a post-Vietnam malaise, Riyadh exerted pressure on a U.S. grappling with concerns over oil supplies, nudging it toward a more hawkish position. This anxiety about energy was reflected not only among the political elite, but also among the general public. McFarland recalls that during Carter’s presidency, almost as many Americans supported intervening in the Gulf if access to oil was cut off as defending Western Europe against the Soviets. A striking example of Saudi influence on U.S. security policy was sending weapons to Yemen in 1979. Dependence on Saudi oil not only led to changes in U.S. foreign policy, but also reshaped parts of the U.S. economy, with one of the underrated factors behind financialization being the petrodollar.

In 1974, the Treasury Department proposed lifting restrictions on foreign activity in the U.S. financial markets to attract funds from OPEC states. McFarland notes that the Treasury kept Saudi investments secret, due to public concerns about the impact of petrodollars, so it designed a special mechanism that allowed it to hide Saudi purchases of U.S. debt. As we learn from Oil Powers, “the government created special arrangements to attract billions of dollars of Saudi money into U.S. Treasurys and Fannie Mae securities, adopting techniques long used by offshore investment hubs to lure foreign capital.”

Riyadh’s financial interests also played a significant part in the Carter administration’s decision to defend the dollar at all cost. Its weakening in the late 1970s caused concern among the Saudis, two-thirds of whose financial assets were denominated in the greenback. The Kingdom’s diplomats pressed Washington to curb its depreciation. The U.S. side feared that if the dollar lost value, Saudi Arabia would not only raise prices to compensate for its losses, but also consider pricing oil in other currencies, further eroding the dollar’s position. The possibility of those events unfolding has overshadowed concerns about slowing growth and increasing unemployment. There are also reasonable grounds to believe that the effort to calm Riyadh was behind Volcker shock. In any event, it is certain that Saudi Arabia held excessive influence over U.S. economic policy.

Shale has opened up geopolitical room for maneuver to America. The United States ceased to be dependent on foreign oil supplies. Before the energy revolution could materialize, however, several important circumstances had to align. While there is no doubt that historically low interest rates played a role in kick-starting the shale boom, they should not be considered the sole or most important factor. America does not owe fracking only to the Federal Reserve.


The federal government’s contribution can hardly be overstated. State investment in R&D related to horizontal drilling, spearheaded by the Department of Energy, was crucial, as was the development of microseismic imaging at Sandia National Laboratory. The industrial policy targeting shale gas involved tax credits, and initial demonstration projects received subsidies.

The fracking boom could not be designed or imposed, and that was not the federal government’s intention. While the private sector experimented, the state focused on reducing the “hurdle rate” for companies. It removed regulatory barriers and crafted incentives to encourage them to take risks and explore new methods and technologies. As Arnab Datta and Skanda Amarnath explain, “These policy choices came from different federal entities with different missions (sometimes wholly unrelated to energy policy). But they worked together over decades, in concert and in succession, to help companies overcome the hurdle rate for risky investments in shale production.”

Is the shale boom fading? Many experts seem to think so. It has entered its mature stage, as consolidations like Exxon Mobil’s purchase of Pioneer Natural Resources may indicate. However, there are optimistic voices. Harold Hamm, one of the trailblazers of the shale revolution, maintains that the next boom is yet to come. He places his faith in new technologies that are expected to open up previously inaccessible rocks. Some analysts argue that AI and Big Data will unlock undiscovered potential, while the entry of big players like Exxon means focusing even more brain power on finding new technological solutions.

Predicting the path of technological development is challenging, but perhaps foreseeing innovation spillovers is even harder. In the case of fracking, it is enabling next-gen geothermal energy.

Beneath our feet lie untapped energy resources—if we dig deep enough. The heat released by the decay of radioactive elements from the earth’s interior is inexhaustible. If geothermal energy could be harnessed, not only would it be completely clean, but it would be available non-stop, regardless of the weather, unlike solar or wind. By reducing the need for energy storage, critical for intermittent renewables, it would also lessen dependence on materials and products integrated into Chinese supply chains.

Until now, geothermal energy has been utilized on a larger scale in only a handful of countries, such as Iceland, with its particular geological conditions at the intersection of two tectonic plates, or Kenya, due to its volcanic activity. Yet, thanks to the shale revolution, advanced drilling and fracking technologies have opened a new chapter for unconventional geothermal energy, offering the possibility of rapid scale-up. Unique geological conditions are no longer necessary; drilling deep enough anywhere will lead to heat resources. As Eli Dourado of the Center for Growth and Opportunity at the University of Utah argues, “with the improvements in exploration, drilling, and subsurface engineering emerging from the shale boom of the last decade, geothermal energy in the United States can scale to terawatts of electricity production within 20 years.” Importantly, if drilling can be done anywhere, clashes with environmental movement can be avoided. Another possibility is to repurpose closed coal plants; their turbines could be used to generate power from geothermal sources.

The problems that will face the development of the new generation of geothermal energy are twofold. First, there is seismic risk. As researcher Austin Vernon notes, the general population has a low tolerance for it, and in Europe this has led to shutting down of some projects. However, it is important to remember that these seismic effects represent a spectrum, and that improving seismic monitoring technology will reduce this risk further.

The second problem is one of political will. While today hydrogen and carbon capture can count on targeted state support, geothermal receives far less attention. Faced with high interest rates, this new, potentially revolutionary technology will be starved for capital. But the government approach to shale provides a useful blueprint for intelligent industrial policy. In 2020, the Trump administration allocated $28 million for geothermal research, emphasizing that “geothermal energy is an important part of the Administration’s diverse, all-of-the-above energy strategy.” However, this won’t be enough. 

Europe provides a cautionary tale here. On the Old Continent, shale was never given a proper chance. A massive backlash from the environmental movement and a lack of determination on the part of political elites has led to a situation where state after state has banned this technology. Certainly, the United States can boast exceptionally good geology, but numerous countries in Europe also had the potential. The consequences of this abdication, however, extend beyond the high cost of energy today; they have also resulted in the squandering of the pivotal opportunity to be part of the geothermal revolution. In the U.S., engineers have perfected their technologies and methods through successive iterations while fracking and drilling American rocks. No one in Europe has accumulated comparable experience under local conditions. America's opportunity here is unique.

With Chinese dominance of clean tech supply chains, OPEC+ gravitating closer to Beijing, and regulatory burdens overwhelming nuclear energy, the U.S. drive for energy self-sufficiency needs new foundations. In 2016, Trump stated that “America’s incredible energy potential remains untapped,” while mentioning a “self-inflicted wound.” To ignore geothermal would inflict a substantial wound, one that would be difficult to heal.


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