Are we all wrong about end of America?

The economy that was the tipping point of global economic vitality not so long ago has almost been written off over the past few months. In fact the degradation of the US economy was in the making since half a decade. However, the process was given a whole new momentum after the downgrade of US’ sovereign rating by the ratings giant S&P. With its ability to print currencies at will, many can argue that the US can indeed turn over a new leaf. We do not think that the cheap money policy can bring back the US to good health though. But revelation of a completely different kind has forced us to reconsider our view.

With its ‘unreal assets’ (currencies and treasury bonds) losing value, the US may once again dip into its natural resources to regain economic vigor. And fortunately for it, a critical natural resource is at its disposal in ample quantities. It is common knowledge that the Middle East has been the epicenter of the global energy supply for half a century now. However, that trend is about to change.

As per Daily Crux, by the 2020s, the capital of energy is likely to shift back to the Western Hemisphere. It must be noted that prior to the ascendancy of Middle Eastern oil suppliers such as Saudi Arabia and Kuwait in the 1960s, the US was the leading supplier of hydrocarbons. Thanks to the country’s abundant reserves of unconventional oil, the old pecking order is all set to reemerge. Geologists believe that he US’ endowment of unconventional oil is more than 2 trillion barrels. Add to that another 2.4 trillion in Canada and 2 trillion-plus in South America. That makes it more than 6 trillion barrels of oil reserves. In comparison, the conventional Middle Eastern and North African oil resources are just 1.2 trillion! That clearly proves who can benefit with oil prices going up. As far as the problem of drilling oil and gas at economic rates is concerned, technology has come handy. With the help of horizontal drilling and other innovations, shale gas production in the United States has skyrocketed from virtually nothing to 20% of the US natural gas supply in less than a decade. By 2040, it could account for more than half of it. Further when it comes to onshore oil production, the peak oil theories have all been proven wrong.

Thus if Wall Street remains in coma for longer than expected, the US can certainly look for other life saving means. Given the necessity of hydrocarbons to the developing world, we will not be surprised if the US is able to effectively capitalize on this opportunity. Its influence on global geo politics can only favour its cause.

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