Unconventional Oil

A Promising Challenge for the Future of Energy

In his book The Quest: Energy, Security, and the Remaking of the Modern World, energy expert Daniel Yergin details the development, rise, and challenges of unconventional oil and other evolving sources of energy that have the potential to alter the global geopolitical balance. In a wide variety of media interviews and published writings, including The Quest, he has also outlined the little-understood revolution in unconventional oil and gas sources that is already underway in the United States and around the world.

As a leading scholar in the field, Yergin points out the rapid change in expectations about the United States’ energy sources. Only a few years ago, experts widely assumed that the United States would be forced to look to the growing foreign supply of imported liquefied natural gas—known as LNG—to meet its expanding energy needs. Now, the North American market is oversupplied with natural gas, thanks to new hydraulic fracturing and horizontal drilling technologies and the rise of shale gas. In a parallel technological development, the “tight” unconventional oil trapped in rock and sand beds is now becoming more and more accessible and having a major impact on U.S. energy supply.

As distinguished from crude oil extracted through traditional oil wells, unconventional oil is accessed through technological innovations based on those pioneered in the now-successful extraction of natural gas from shale rock.
These improved production methods for obtaining unconventional oil—“tight oil”—are largely responsible for the 25 percent increase in U.S. oil production since 2008. This figure represents the highest growth in oil output for any country in the world since 2008. One significant result of this unconventional oil and gas revolution is the creation of nearly 2 million jobs in the United States, extending from work on drilling rigs, to manufacturing and processing plants, and to ancillary service industries along the economic chain—including everything from information technology to law and retail sales. And because of the growth in domestic oil production, the U.S. is now saving about $70 billion a year on its balance of payments. Sources of unconventional oil—some of them more accessible than others—include Canadian oil sand and possibly oil shales, in addition to coal-based and biomass-based liquids. The output of Canadian oil sands has become very significant—exceeding, for instance, Libya’s entire oil production before civil war disrupted supplies in that country in 2011.

Another important unconventional source of oil lies in deepwater production. Today, almost one-third of the total world oil production comes from offshore wells in both shallow and deep waters. The common denominator among all sources of unconventional oil is the need for continued technological advances to increase recovery and manage environmental impacts as these resources grow in scale—and as they play an ever-growing role in the energy web of the world economy.
The need for unconventional oil is highlighted by the growing demand for oil products in emerging markets, like China and India, where more and more people are moving out of poverty, and rising incomes are pushing demand for energy. Already, China’s automobile market is larger than that of the United States. While in many cases unconventional oil is considered more expensive than conventional oil, the surging global demand for energy makes clear its importance to the continued development of the world economy.

By 2020, the development of unconventional oil and natural gas sources in the United States could lead to the creation of a total of 3 million jobs. And the development of unconventional oil around the world, especially tight oil, could tip the balance of the geopolitical scale as well—although in ways that are not yet clear. Because of their job-creating impact and their impact throughout the economy, unconventional oil and natural gas are not only making a contribution to economic recovery in the United States, but are giving the country a new competitive edge in the world economy.