The sleepy agricultural backwaters of North Dakota have been transformed into oil boomtowns. In Pennsylvania, the Marcellus Shale formation is producing 13 billion cubic feet of natural gas per day, which is more than Saudi Arabia produces. With the advanced technologies of horizontal drilling and hydraulic fracturing, developers are extracting gas locked in rock formations a mile below the surface of the earth. BP predicts that the United States will become a net exporter of gas by 2018 and the International Energy Agency (IEA) predicts that by 2015, the United States will be the largest global oil producer due to its unparalleled technological capacity and its large shale formations that can support ten-fold increases in production. These dramatic predictions, if realized, will impact the relations of the world’s major energy market players.

First, the decreased global importance of Middle Eastern oil has the potential to decrease regional conflict and US involvement in the Middle East. Currently, the United States imports 12 percent of its oil from the Persian Gulf, but the IEA predicts this will fall to 3 percent by 2035.

Oil is a strategic resource that has historically had a large impact on international security and has traditionally been a source of conflict. When a country imports a large fraction of its oil supply, it is left vulnerable to regional wars and hostile states that can cause economic damage and military weakness for the importing nation. The state has the incentive to intervene to protect its regional interests and prevent a hostile state from gaining a significant share of the global oil supply. This phenomenon has been seen historically and in the present day. For example, in the Gulf War in 1991, the United States intervened to expel Iraqi forces from Kuwait and prevent them from gaining control of the Saudi oil supply. At that time, the United States imported nearly 30 percent of its oil supply from the Persian Gulf, leaving it extremely vulnerable to regional disruptions and with a large incentive to intervene militarily.

However, with Persian Gulf imports at only 3 percent of totals, the United States would be much less exposed to Middle Eastern conflict. Compared to five years ago, the United States has become less vulnerable to the effects of Iran closing the Strait of Hormuz, through which 20 percent of global oil production flows, in response to US and European sanctions. The United States could potentially choose to reduce its naval presence in the Persian Gulf, and let China, a country that imports 60 percent of its oil from the Middle East, police the region. Regardless of what the United States chooses to do, decreased global dependence on Middle Eastern oil will lead to more flexibility in foreign policy and decrease the dangerous consequences of unrest in the Persian Gulf.

The shale revolution’s boon to the United States’ negotiating position in the Middle East has evinced this flexibility. In 2010, the US Congress passed the Comprehensive Iran Sanctions, Accountability, and Divestment Act, further strengthening long term economic sanctions placed on Iran in 1996. The act targeted actors engaging in business with Iran’s petroleum sector, with the hope that the sanctions on oil exports would cripple Iran’s oil-dependent economy, thereby forcing Iran to the table in nuclear negotiations. When the stricter sanctions went into effect, there were fears that such a large reduction in the global oil supply would drive up oil prices to unsustainably high levels, resulting in a failure of the sanctions. However, due to the US shale boom, which has provided an alternative energy source to Middle Eastern oil, global oil prices did not skyrocket and the hardline sanctions were successful in forcing Iran to negotiate reductions in its nuclear program this past November.

Looking beyond the Middle East to major world players, the shale boom has the potential to increase cooperation between the United States and China. Due to the boom, China’s national oil companies (NOCs) have had the lucrative opportunity to acquire exploration and production assets abroad in a previously desolate market. China’s NOCs have focused their investment on the North American oil industry and have spent US$44.2 billion to acquire North American assets since 2008. Furthermore, China is currently sitting on largely untapped shale reserves believed to be 50 percent larger than those in the United States. If developed, these natural gas reserves would increase China’s energy security, giving the country control over its economic development and the ability to meet growing domestic energy demand. However, in the near term, it does not seem feasible for China to capitalize on these large shale reserves. Chinese electricity generation is heavily dependent on fossil fuels such as coal, and, as recently as 2011, natural gas only accounted for 5 percent of China’s total energy consumption. Due to the vast investment in upstream development necessary to bring China’s natural gas to market, in the short term it seems likely that domestic production will be dwarfed by natural gas imports that will continue to grow rapidly, with resources coming from mainly Australia, Qatar, and Indonesia.

Russia will remain a major player in the global natural gas market. Currently slightly trailing the United States as the world’s second largest producer of natural gas, Russia seems poised to continue as the European Union’s largest supplier. With Russia’s developed export infrastructure and its relatively cheap transport prices compared to those of the United States, it is unlikely that Russia’s position as a regional exporter will be challenged in the near future.

However, Russia’s role in the global energy markets will not remain completely static in the face of the US shale boom. Prior to the shale boom, natural gas production capacity was developed to meet rising US demand for the commodity. Now that the United States will stop importing any natural gas, suppliers must find new markets for export. It is conceivable that Russia will successfully target growing Asian markets as it diversifies away from its demand dependence on the E.U. Last year, China and Russia reached an agreement for Russia to develop a pipeline to China to supply natural gas.

So far, the shale boom has increased the United States’ competitive advantage and led to a renaissance of domestic manufacturing capabilities. It remains to be seen if the boom is sustainable or if the increased supply will drive down oil prices to the point that further shale exploration and development is no longer profitable. The length of the boom and the degree to which other countries develop their own natural gas industries will detemine the extent mine the extent of the geopolitical reordering of the energy market.