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ROME — In sweeping terms, the economic model of countries in North Africa, parts of West Africa and the Middle East comes down to this: Trading hydrocarbons for carbohydrates.
The oil-out, wheat-in formula has worked rather well for decades, the odd land war and revolution notwithstanding. Egypt is the world’s biggest single buyer of imported wheat. Saudi Arabia is giving up on its gruesomely expensive experiment to grow wheat in the desert; it is happy to swap oil for much of its food consumption. Ditto Nigeria, whose population is exploding and which produces almost no wheat itself.
And then came the shale revolution. Shale oil and gas production in the United States is soaring and American oil imports are falling fast. Oil and gas prices are down and the forecasts are bearish, a remarkable turnaround from 2007 and 2008, when $200 (U.S.) a barrel oil seemed somewhere between possible and likely (the benchmark Brent price is now about $104). The shale revolution is about to hit Britain and other parts of Europe.
What is good for the United States and Europe – less imported oil and gas and lower prices for both – is bad news for some of the one-product wonders in Africa, the Middle East and Latin America. The power-and-income shift away from the traditional energy exporters to gluttonous energy consumers could trigger potentially dire economic and social consequences in the exporting countries, especially the ones with undiversified economies.
The world saw what plummeting personal incomes and national wealth did to Greece. The same, or worse, could occur in the developing world’s oil-pumping economies.
For Americans, the shale revolution is the most thrilling news since the invention of the propane barbecue, in spite of legitimate concerns about groundwater contamination from “fracking” – the hydraulic cracking of shale-rock formations to release hydrocarbons – and methane release from wells. The shale drilling and production has created vast numbers of jobs, turned struggling states, like North Dakota, into mini Saudi Arabias and attracted industries, like chemical and fertilizer producers, that require cheap hydrocarbons to thrive.
Most of all, it has drastically cut the American oil import bill. Thanks to the shale-drilling bonanza, U.S. crude oil production grew by more than one million barrels a day – equivalent to 14 per cent of output – in 2012, the biggest increase ever, according to the latest edition of BP’s Statistical Review of World Energy, published this week.
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