Peter Zeihan - The Absent Superpower: The Shale Revolution and a World Without America

The Absent
SUPERPOWER

The Shale Revolution and
a World Without America

Peter Zeihan

Copyright 2016 by Zeihan on Geopolitics

All rights reserved. In accordance with the U.S. Copyright Act of 1976, no part of this publication may be reproduced, distributed, shared or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher. If you would like to use material for the book (other than for review purposes), prior written permission from be obtained by contacting the publisher at publishing@zeihan.com. We thank you for your support of the authors rights and intellectual property.

Peter Zeihan
Zeihan on Geopolitics
Austin, TX
www.zeihan.com

Book Design by Scott J. Doughty

First eBook Edition: January 2017
ISBN: 978-0-9985052-1-3

10 9 8 7 6 5 4 3 2 1

To the team who makes not just this book, but everything that I do, possible.

Susan Copeland

Michael Nayebi-Oskoui

Melissa Taylor

Wayne Watters

You keep me wired.

You keep me on task.

You keep me honest.

You keep me grounded.

You keep me in the right state.

Some of these tasks are more difficult than others.

Contents

INTRODUCTION

PART I: Shale New World

Chapter 1

Chapter 2

Chapter 3

Chapter 4

PART II: The Disorder

Chapter 5

Chapter 6

Chapter 7

Chapter 8

Chapter 9

Chapter 10

PART III: The American Play

Chapter 11

Chapter 12

Chapter 13

Conclusion

Appendices

Appendix i

Appendix i

Appendix ii

INTRODUCTION

The Journey to The Absent Superpower

EVERYTHING IS CHAOS!

At least, that what it seems like every time you turn on your TV, radio, computer, or smart phone.

The European Union is falling apart, Syria is in meltdown, cybercrime is an hourly occurrence, the Chinese economy is gyrating wildly, Russia is on the march, the election of Donald Trump has Americans of all political stripes wondering what comes next, and the Kardashians get more press time than Congress. Its enough to give anyone a panic attack.

Well, not quite anyone. Unlike the average person, all this craziness puts me in my happy place. Where most see the world turning itself upside down and inside out, I see a long-overdue shift in the global order. New trends emerging. New possibilities unfolding. For me, change is good for business.

Thats because my job is a bitdifferent than the standard. You see, Im a geopolitical strategist. Thats a fancy way of saying I help organizations understand what challenges and opportunities they will be grappling with across the world in the years to come. As such Im sort of a professional apprentice, rarely a master of any particular craft but needing to be able to hold my own in conversations about manufacturing and transport and health care and finance and agriculture and metals and electricity and education and defense and such. Preferably without pissing off anyone whose living is based off of manufacturing or transport or health care or finance or agriculture or metals or electricity or education or defense.

In many ways those conversations make me who I am. From the Air Force to the Pickle Packers, every interaction gives me a good hard view of the world, yet each of these interactions originates from a radically different perspective. Combine all those angles and interactions and perspectives and the unique information that comes from them with my private intelligence experience, and Im granted the privilege of seeing something approximating the full picture how the worlds myriad pieces interlock and catch some telling future glimpses to boot. More than anything else, what I sell is context.

That picture and those glimpses and that context formed the bones of my first book, The Accidental Superpower , which was published in November 2014. In Accidental I made the case that the world we knew was at a moment of change: The Americans who had created, nurtured, enabled, maintained and protected the post-WWII global order were losing interest. As they stepped back the world we know was about to fall to pieces.

At any time in history such a shift would have had monumental consequences, but the American retrenchment is but one of three massive shifts in the global the order. The second is the rapid greying of the entire global population. Fewer people of working age translates directly into anemic, decaying economies enervating global trade just as the Americans stop guaranteeing it. Third and finally, the American shale revolution has changed the mechanics if not yet the mood of how the Americans interact with the energy sector. Surging petroleum output within the Lower48 is pushing North America toward outright oil independence; in the past decade the total continental shortfall has narrowed from roughly 10 million barrels of oil per day (mbpd) to about 2mbpd.

In the two years since Accidental published, Ive had ample opportunity to re-examine every aspect of my work some of my critics have been (over)eager to assist in such endeavors and I fear that I may have been off the mark on a couple of points.

First, the American shale sector has matured far faster and more holistically than I could have ever expected.

Despite a price crash in oil markets, despite ongoing opposition to shale among a far from insignificant portion of the population, despite broad scale ignorance about what shale is and what shale is not, shale has already overhauled American energy.

In 2006 total American oil production had dropped to 8.3mbpd while demand was touching 20.7mpbd, forcing the United States to import 12.4mpbd, more than Japan and China and Germany combined. By 2016 U.S. oil output had breached 15mbpd. Factor in the Canadians and Mexicans, and total American imports of non-North American oil had plunged to about 2mbpd and that in the teeth of an oil price war. And thats just oil specifically. Take a more comprehensive view and include everything from bunker fuel to propane, and the continent is less than 0.8mbpd from being a net energy exporter .

The end of American dependence upon extra-continental energy sources does more than sever the largest of the remaining ties that bind Americas fate to the wider world, it sets into motion a veritable cavalcade of trends: the re-industrialization of the United States, the accelerated breakdown of the global order, and a series of wide-ranging military conflicts that will shape the next two decades.

This books opening section contains the long and the short of this Shale New World, the greatest evolution of the American industrial space since at least 1970. For the financiers and accountants and policy wonks out there, this was written with your geeky brains specifically in mind.

Second, the isolationist trickle I detected in American politics has deepened and expanded into a raging river. Of the two dozen men and women who entered the 2016 presidential race, only one Ohio Governor John Kasich advocated for a continuation of Americas role in maintaining the global security and trade order that the Americans installed and have maintained since 1945. The most anti-trade candidate on the right won his partys nomination, while the most anti-trade candidate on the left finished a close second in the Democratic primaries to the Clinton political machine. Last night (now President) Donald Trump and Hillary Clinton met in New York to debate economic policy. What struck me as self-gratifying and horrifying in equal measure was that their core disagreement on trade issues wasnt whether trade was good or bad for the United States, but how much to pare it back and which reasons for paring cut it the most with the electorate. (The pair of them obviously disagreed colorfully, vehemently and often on other issues.)