Domestic energy consumption in the world's largest oil exporter, Saudi Arabia, is growing so fast that it threatens the country's ability to adequately supply world oil markets, London think tank Chatham House warned Wednesday.

However, Chatham House's recommended solution to this problem-raising domestic energy prices in the kingdom-is also fraught with danger, as violent protests against similar price hikes in Nigeria demonstrate.

This shows how Saudi Arabia, and by extension the buyers of its oil in the developed world, will have to navigate a treacherous path between falling oil exports on one side and potential civil unrest on the other-either of which could cause a damaging oil price spike.

In a report posted on its website Wednesday, Chatham House warned:

"Saudi Arabia's energy consumption pattern is unsustainable. Demand for its own oil and gas is growing at around 7% a year. At this rate of growth, national consumption will have doubled in a decade."

If that happens, it could deprive the world of 2 million barrels a day of oil exports and largely eliminate the Saudi spare oil production capacity that is so important as a cushion against sudden supply disruptions, such as the civil war in Libya.

The end result could be "an oil supply crunch leading to major price spikes on the world market," it said.

David Fuller's view This is another very important reason why every country needs to prioritise energy independence. Saudi Arabia is not the only oil producer with an authoritarian government which bribes its citizens with cheap oil and other subsidies in order to stay in power. All of them are certain to increase their energy consumption.

Meanwhile, the best way for other countries to achieve energy independence within a decade, for those fortunate enough to have the resources, is by developing domestic oil and gas reserves, including shale deposits.

Inevitably, there are environmental trade-offs in the extraction, refining and burning of fossil fuels, but it can be done in an increasingly responsible manner thanks to technological progress.

Countries without conventional and non conventional oil and gas reserves should reconsider modern nuclear power technology, in my opinion. The French did this very successfully and have produced over 70 percent of their electricity with nuclear power in recent decades. However, following Fukushima (very old plant on a vulnerable site, plus bad and poorly regulated management) a majority of French people now want to phase out nuclear power. The country has also banned the fracking of shale reserves. Shades of, 'Those whom the gods wish to destroy they first make mad.'

Political greens mostly oppose the use of fossil fuels and nuclear power. We are all green at heart - in terms of our love for planet earth and nature - but the activists do not have a viable alternative to fossil fuels and nuclear power at this time. Over-reliance on expensive and currently unreliable alternative forms of energy such as wind and solar will weaken our economies and leave us increasingly vulnerable to the next oil price spike. Also, we are in the process of discovering that wind and solar farms introduce their own environmental risks, commencing with the need for back-up coal power stations when the often dramatically fluctuating output from renewable energy sources falls.

This does not mean that we should cease research and development for various renewables - far from it. They are a long-term solution but possibly twenty or more years from being economically competitive. Meanwhile, cleaner coal, including gas from coal, arguably has better short to medium-term prospects.

The USA's cutting edge technology has enabled it to develop rapidly its abundant shale oil and gas reserves. This is a key and generally unheralded reason, in my view, for why the US economy avoided the consensus prediction of double-dip recession last year, a view that Fullermoney never shared. It also considerably reduces the risk of a drift back into recession this year. The other two main contributors to the USA's better than generally expected performance are the Federal Reserve's quantitative easing (QE), albeit at a huge risk of future inflation when a stronger economic recovery next occurs, and the Asian-led growth economies which continue to import goods and services from the USA.

Euroland, in contrast, is proving reluctant to develop its more modest reserves of shale oil and gas. It has also turned against nuclear power. The ECB's QE has really only just commenced.

Here is the report mentioned in the WSJ article above. I commend it to you.

Sifting through a number of articles on the internet, the Bakken formation in Montana, North Dakota and extending into Saskatchewan is probably the world's largest known deposit of shale oil. We have known about it since 1951 but before the turn of the century, the means of extracting oil from Bakken and other US shale oil deposits had yet to be invented.


Here is the US Geological Survey report from October 2008 on Bakken, increasing their assessment of recoverable oil by 25 times since the 1995 estimate.


Here is some very recent conjecture on Bakken from the blogosphere, which I take with the proverbial grain of salt.