[Dr. Aaron Lerner - IMRA:

So here is the lineup:

#1. In a few years the US won't be as concerned about what the Arab think.
#2. In a few years the Chinese won't consider energy supplies from the Arab
world as being of paramount importance for its own continued stable growth.
#3. In a few years even France and Germany may become energy sources rather
than importers.

Certainly sounds like Israel will be in a considerably more favorable
position at that time.

So much for the argument that Israel should rush now and cut a lousy deal
with the Palestinians because "time is not on Israel's side."]

The International Energy Agency (IEA) estimates that the United States will
replace Russia as the world's largest producer of natural gas in only two
years. The Americans could also become the world's top petroleum producers
by 2017.

The Chinese and the Argentines also have enormous shale gas reserves.
Experts believe that Poland, France and Germany have significant resources,
although no one knows exactly how significant. Outside the United States,
extraction is still in its infancy.

Full Throttle Ahead
US Tips Global Power Scales with Fracking
By SPIEGEL Staff 1 February 2013
http://www.spiegel.de/international/world/new-gas-extraction-methods-alter-global-balance-of-power-a-880546.html

The United States is sitting on massive natural gas and oil reserves that
have the potential to shift the geopolitical balance in its favor. Worries
are increasing in Russia and the Arab states of waning influence and falling
market prices.

Williston, North Dakota, is a bleak little city in the vast American
prairie. It's dusty in the summer and frigid in the winter. Moose hunting is
one of the few sources of entertainment. But despite its drawbacks,
Williston has seen its population more than double within a short period of
time.

The city is so overcrowded that new arrivals often have no place to stay but
in their motor homes, which, at monthly parking fees of $1,200, isn't
exactly inexpensive. And more people continue to arrive in this nondescript
little town.

The reason for the influx is simple: Geologists have discovered a layer of
shale saturated with natural gas and oil deep beneath the city. The Bakken
formation, spanning thousands of square kilometers, has become synonymous
with an American economic miracle that the country hasn't experienced since
the oil rush almost 100 years ago.

North Dakota now has virtual full employment, and the state budget showed an
estimated surplus of $1.6 billion in 2012. Truck drivers in the state make
$100,000 a year, while the strippers being brought in from Las Vegas rake in
more than $1,000 a night. President Barack Obama calls the discovery of
Bakken and similar shale gas formations in Texas, Colorado, Pennsylvania,
Louisiana and Utah a "stroke of luck," saying: "We have a hundred years'
worth of energy right beneath our feet."

A Vital Nerve

The future of the American energy supply was looking grim until recently.
With its own resources waning, the United States was dependent on Arab oil
sheiks and erratic dictators. Rising energy costs were hitting a vital nerve
in the country's industrial sector.

But the situation has fundamentally changed since American drilling experts
began using a method called "fracking," with which oil and gas molecules can
be extracted from dense shale rock formations. The International Energy
Agency (IEA) estimates that the United States will replace Russia as the
world's largest producer of natural gas in only two years. The Americans
could also become the world's top petroleum producers by 2017.

Low natural gas prices -- the price of natural gas in the United States is
only a quarter of what it was in 2008 -- could fuel a comeback of American
industry. "Low-cost natural gas is the elixir, the sweetness, the juice, the
Viagra," an American industry representative told the business magazine
Fortune. "What it's doing is changing the US back into the industrial power
of the day."

The government estimates that the boom could generate 600,000 new jobs, and
some experts even believe that up to 3 million new jobs could be created in
the coming years. "My administration will take every possible action to
safely develop this energy," Obama said during his most recent State of the
Union address.

Shifting Calculations

The gas revolution is changing the political balance of power all over the
world. Americans and Russians have waged wars, and they have propped up or
toppled regimes, over oil and gas. When the flows of energy change, the
strategic and military calculations of the major powers do as well.

It is still unclear who the winners and losers will be. The Chinese and the
Argentines also have enormous shale gas reserves. Experts believe that
Poland, France and Germany have significant resources, although no one knows
exactly how significant. Outside the United States, extraction is still in
its infancy.

The outlines of a changed world order are already emerging in the
simulations of geo-strategists. They show that the United States will
benefit the most from the development of shale gas and oil resources. A
study by Germany's foreign intelligence agency, the BND, concludes that
Washington's discretionary power in foreign and security policy will
increase substantially as a result of the country's new energy riches.

According to the BND study, the political threat potential of oil producers
like Iran will decline. Optimists assume that, in about 15 years, the United
States will no longer have to send any aircraft carriers to the Persian Gulf
to guarantee that oil tankers can pass unhindered through the Strait of
Hormuz, still the most important energy bottleneck in the world.

The Russians could be on the losing end of the stick. The power of President
Vladimir Putin is based primarily on oil and gas revenues. If energy prices
decline in the long term, bringing down Russian revenues from the energy
sector, Putin's grip on power could begin to falter. The Americans' sudden
oil and gas riches are also not very good news for authoritarian regimes in
the Middle East.

European industry is also likely to benefit from falling world market prices
for oil and gas. But according to prognoses, without domestic extraction the
Europeans' site-specific advantages deteriorate.

German chemical giant BASF has already invested a lot of money in the United
States in the last two years. In Louisiana, for example, it has built new
plants for the production of methyl amines and formic acid. "The local
natural gas price is a criterion that affects the question of where we
invest in new production facilities," says BASF Executive Board member
Harald Schwager. At the moment, the United States has a clear advantage over
Europe in this regard."

German Reservations

So far, the political debate in Germany has been dominated by concerns over
adverse environmental effects. Fracking has become a dirty word for
citizens' initiatives and environmental groups.

The concept of pumping water laced with chemicals into the earth at high
pressures to crack open layers of rock several thousand meters beneath the
surface makes many citizens uneasy, even though the technology has, in
principle, already been used for decades in conventional gas extraction in
the northern German state of Lower Saxony.

At the same time, Germany's energy and climate policy would in fact be a
reason to use the new gas reserves. Flexible gas power plants would be the
best approach to offsetting unpredictable fluctuations in wind and solar
electricity, thereby maintaining a reliable power supply. Besides, burning
natural gas generates up to 60 percent less climate-damaging CO2 than
burning coal.

With the help of natural gas, the Americans have been able to reduce their
CO2 emissions associated with energy production to the lowest level in
years. This is one of the reasons the country plans to replace one in six
coal-fired power plants with gas power plants by 2020.

At the Munich Security Conference this weekend, fracking will be at the top
of the agenda for the first time. In fact, one of the agenda items is called
"The American Oil and Gas Bonanza." In past years, nuclear weapons and
threats from international terror were discussed at the conference, but this
year one of the hot topics is the "Changing Geopolitics of Energy." This
shows how important the issue has become. "It is perhaps a permissible
exaggeration to claim a natural gas revolution," John Deutch, a former
undersecretary at the Energy Department and CIA director, and now a
professor at the elite Massachusetts Institute of Technology, recently wrote
in Foreign Affairs magazine. Deutch has been monitoring the development for
years.

America 's Energy Miracle

In the late 1990s, American oil and gas companies used new technologies to
advance into previously unexplored layers of the earth. They drill up to
4,000 meters (13,123 feet) into the shale, then make a sharp turn and
continue to drill horizontally. Then they inject a mixture of water,
chemicals and sand into the drilled well at high pressure. This creates
small fractures in the surrounding rock, allowing gas and oil to be released
and rise to the surface through pipes.

New technologies are drastically reducing drilling costs. In 2012, shale gas
already made up 34 percent of total production, and the technology is
constantly improving. The sector is booming, and there are dozens of new
companies searching for additional, previously undiscovered deposits.

In the future, the United States could even go from being a net energy
importer to a net exporter. But that would require a true policy shift.
Since the oil shock of the 1970s, the export of domestic petroleum resources
has been banned in the United States. Many companies also have an interest
in keeping as much of the cheap natural gas in the country as possible, as
it provides them with a competitive advantage over foreign competitors.

According to a study, lower natural gas prices last year created a benefit
worth more than $100 billion for US industry. "The country has stumbled into
a windfall on the backs of these entrepreneurs," says study co-author
Professor Edward Hirs of the University of Houston.

And perhaps things will indeed improve substantially. The US government has
identified a new deposit in Utah, although additional major advances in
technology are needed to make extraction economically viable. The Utah
deposit contains an estimated 1.5 trillion barrels of extractable oil, or as
much as the world's entire proven oil reserves to date.

Russia on the Losing End

A building in the southwestern section of Moscow juts into the sky like a
rocket. The architectural message of the headquarters of energy giant
Gazprom, which towers over everything else around it, is clear: The only way
is up. Until recently, there was still an overwhelming consensus that
nuclear weapons and energy commodities like oil and gas are the two
currencies that gave a country its superpower status. Russia, the world's
largest exporter of natural resources, has both in abundance.

President Putin built his dominance at home and his foreign policy on
Russia's wealth of natural resources. Oil and gas revenues make up about 50
percent of the national budget. The president needs Gazprom's billions in
revenues to keep his supporters, mostly government employees, retirees,
blue-collar workers and farmers, happy with expensive social benefits. Gas
also plays a central role in the plan to expand Russia's sphere of influence
into the former Soviet republics.

But now the American natural resources boom threatens Putin's dreams of an
imperial resurrection of his country. It is already struggling with falling
gas prices. Gazprom's operating profit shrank by more than 25 percent in the
first nine months of 2012.

The Russians are now forced to give their customers, like Germany's E.on and
Italian energy company Eni, discounts in the billions. Still, the Europeans
are reorienting themselves. In the first three quarters of 2912, Gazprom
sales fell by 43 percent in the Netherlands, 30 percent in Slovakia and 20
percent in France.

The Kremlin Is Alarmed

No one in Moscow can rattle off these statistics as quickly as Vladimir
Milov. He was deputy energy minister after the turn of the millennium, and
today he heads a small opposition party. Milov believes Gazprom is a giant
with clay feet. "America is announcing the shale gas revolution, while
Gazprom and Russia remain in hibernation," he says.

If liquefied natural gas from the United States lands at the ports of
Rotterdam, Hamburg or Odessa in the future, it will further increase the
pressure on prices. And if Moscow remains intransigent in the discussion of
an Iran resolution in the UN Security Council, Washington could threaten to
flood the market with natural gas.

If that happened, Russia's attempt to influence the world market price
through a natural gas group similar to OPEC would also be off the table once
and for all. Last July, Russia invited the world's large gas exporters to
discuss improved cooperation, but to no avail. If the United States exports
a portion of its enormous resources, price and production agreements will
likely become impossible once and for all.

The Kremlin is alarmed, despite Gazprom CEO Alexey Miller's dismissive
characterization of the revolution as an exaggeration in the style of
"American Hollywood films." Shale gas will play only a secondary role in the
market, says Miller, citing the billions Western energy companies are
investing in pipelines and the traditional exploration of Siberian gas
fields.

But new pipelines are expensive, and it is completely unclear whether the
South Stream pipeline, which is to transport Russian gas from the Black Sea
to Italy, across a distance of 2,380 kilometers (1,490 miles), and will cost
an estimated €16 billion to build, will ever pay off. Miller's spokesman
Sergey Kupriyanov admits that the new technologies work in America's favor.

But another trend is being overlooked, says Kupriyanov. "The demand for gas
will increase worldwide," he explains, "because the economies of the rapidly
growing emerging countries need energy and, in the future, more automobiles
and soon more ships will be operated with environmentally friendly natural
gas."

It seems certain that Russia will remain an important supplier of
commodities. But its political threat potential will shrink if the countries
of Western Europe and Ukraine have more alternatives to Russian natural
resources. Moscow will likely become the biggest political loser of the
America natural resource boom. But what does it look like at other key
points in the business?

No Blood for Oil

The Middle East, for example, is a dangerous region, repeatedly racked by
war in the last few decades. The Americans attacked Iraq twice to secure
their oil supply.

More than 20 US warships are stationed in Bahrain, including an aircraft
carrier, as well as several destroyers and submarines. The US Navy's Fifth
Fleet is intended to secure the Strait of Hormuz, which connects the Persian
Gulf with the Gulf of Oman. Some 35 percent of the global oil trade
involving ships passes through the Strait.

With its efforts in the Gulf, the American military is not only protecting
trade routes, but also the monarchies in the region. In return the Saudis,
still the world's largest oil producer today, have ensured that OPEC pursues
a moderate price policy. But the tradeoff of security against oil is costly
for the Americans.

Washington pays billions for its military presence in the Middle East. And
the costs are not just material. The fact that American troops were deployed
to the war in Kuwait from Saudi soil was the catalyst that triggered former
al-Qaida leader Osama bin Laden's fight against the United States.

According to BND estimates, the Americans could soon dispense with energy
shipments from the Middle East altogether. It is conceivable that the United
States could then no longer have a direct interest in protecting the flow of
oil out of the Gulf region, London-based energy expert Alan Riley recently
wrote in the New York Times.

Nevertheless, it is unlikely that the United States will withdraw from the
region in the foreseeable future. "The United States will remain dependent
on international energy markets for a long time to come," says Joseph Braml
of the German Council on Foreign Relations.

Besides, US interests in the Middle East are not limited to oil. They also
include both containing Iran and fighting Islamist terror. Finally,
protecting Israel also plays a central role in American foreign policy.

"Anyone who thinks that the Americans could withdraw from the Middle East
understands neither the dynamics of the oil markets nor the geopolitical
relationships," says Braml. One reason that America will maintain a presence
at the Strait of Hormuz, he explains, is to be able to shut off the energy
tap to the Chinese if necessary.

Still, the Europeans, in particular, could face new political challenges.
"It ought to become easier for America in the future to demand more help
from others in securing the energy supply," says security expert Michael
O'Hanlon of the Washington-based Brookings Institution. This applies to
Washington's NATO allies, he adds, and to Japan, South Korea and even India.

For Germany, this would probably not mean sending its own troops to the
Gulf. But it would have to make a stronger contribution to the costs of the
US mission.

According to the BND's assessment, the Chinese will be significantly on the
losing end of American oil wealth. The country will become even more
dependent on the Gulf region than it is now, and yet it is still not in a
position to protect the transport routes on its own. This makes it
vulnerable, the BND argues, and gives the United States more room for
maneuver with its global political rivals. But what does all of this mean
for Germany?

'Typical German Behavior'

In a study conducted last year, the Federal Institute for Geosciences and
Natural Resources in the northern German city of Hanover concluded that even
Germany has substantial untapped natural resources beneath its soil: between
700 and 2,300 billion cubic meters of extractable shale gas, or 200 times
the country's current natural gas production. "This means that shale gas
from domestic reserves, if used extensively, could contribute significantly
to Germany's natural gas supply," say the institute's experts.
Representatives of energy companies ExxonMobil and Wintershall estimate the
marketable value of this treasure at up to €1 trillion.

The Hanover study makes it seem as if Germany could immediately start
drilling. It also states that environmental concerns are unfounded, because
the method in question has been around for a long time, although it has only
been used so far in other types of rock.

"The risks of fracking activities in the geological subsoil are low compared
with potential accidents in above-ground activities," the study reads. In
other words, if an oil truck tips over on the road, the risk of groundwater
contamination is much greater than with fracking. But the study also points
out that it would be best to stay away from regions vulnerable to
earthquakes.

But the concerns about fracking prevail in politics. The government of the
western state of North Rhine-Westphalia, a coalition of center-left Social
Democrats and the Greens, imposed a moratorium of sorts, and it has even
refused to issue a permit for an exploratory well requested by ExxonMobil.
And in Lower Saxony, where the fracking process has already been widely used
in conventional gas deposits, the mood has shifted after the recent
SPD-Green Party win in state parliamentary elections.

The critics base their arguments in part on a position taken by the Federal
Environment Agency, which is of course particularly sensitive when it comes
to environmental matters. According to the agency's position, fracking
should only be allowed under the strictest of conditions, which in turn
displeases proponents.

"It's typical German behavior," says BASF board member Schwager, "to
initially see only the risks with every new technology, instead of thinking
about the opportunities.

Environment Minister Peter Altmaier and Economics Minister Philipp Rösler
have learned their own lessons from the dispute among experts. Fracking,
they state in their position papers, is technically complex and
environmentally controversial. In other words: Let's not touch it with a
10-foot pole, at least until after the national parliamentary election in
the fall.

REPORTED BY ALEXANDER NEUBACHER, RALF NEUKIRCH, MATTHIAS SCHEPP, THOMAS
SCHULZ

Translated from the German by Christopher Sultan