The shale oil and gas revolution has been a principal cause of the recent drop in oil prices. This decline provides the equivalent of a tax cut for consumers. It is to be applauded for that reason alone. But even more importantly, it boosts our liberty and security as well by weakening the power of Russia, Venezuela, Iran and other nations heavily dependent on resource extraction.
It is not widely appreciated, but the rise of shale energy is in large measure yet another benefit of the computational revolution. Supercomputers find the right formations in which to drill, and smart drilling guided by computation makes the extraction of oil much cheaper. With advances in computation, these costs will continue to fall. The computational revolution, made almost entirely in the United States, is fostered by our culture of liberty. And the United States has permitted the shale revolution to go forward, unlike in Europe, where many nations have prohibited it by regulation.
The shale revolution is also a great boost to liberty because it empowers knowledge economies at the expense of resource extraction economies that generate threats to liberty. Economies that revolve largely around simple resource extraction tend to generate oligarchical governments rather than true democracies. Venezuela, Russia, Iran, and Saudi Arabia differ in their proclaimed form of government, but in all decisions are taken by an insular group and opposition is regularly suppressed. They can do so, because the government controls large resources from which it can fund its activities without real popular consent. Moreover, their political leaders can use the resources to foment trouble abroad without substantial constraint.
Russia wants to restore its imperial glories. Iran wants the nuclear bomb to advance its Islamic theocracy. Some in the ruling groups of the Gulf oil states finance Islamic extremists. The fall in oil price is making all these schemes more difficult. And innovation in renewable energy, also driven by computational advances, will further constrain the power of these nations.
In contrast, the knowledge economy by its very nature spreads power more broadly. Knowledge is created by a large and changing cast of characters. The technology of knowledge is dynamic: one corporate powerhouse is succeeded by another; IBM gives way to Microsoft, which gives way to Apple and Google. The kind of production diffuses political power and this diffusion creates the conditions for further sequential innovation.
The rise of shale oil gives us reason to be optimistic about the course of liberty in the next century. Computational technology is the arsenal of modern democracy. It makes information matter more than matter, and in a less material world liberty flourishes.