Amidst the doom and gloom headlines presaging dire prognostications for the Western economies in 2012 there is the very real promise of a global economy re-directing miracle in the making. The impact and promise of shale gas and shale oil is probably the good news story as we step into 2012. Not that you would know it, given the media’s predilection for bad news.

Only two obstacles stand in the way. First, bad energy policies that do not prioritise cheaper fossil fuels – dumping countless millions out of jobs and into fuel poverty. Second, environmentalist campaigners implacably opposed to any hydrocarbon-fuelled energy development. It threatens their Disney-esque utopian blueprint.

But before we glimpse a rare ray of sunshine amidst the stretching economic gloom, we must first demolish a key widely held myth that is fuelling bad energy policy-making: that oil and gas prices will only go on rising, ultimately rendering their cost comparable to expensive and feeble renewable energy generation. As economist and professor of energy policy Dieter Helm’s recent excellent article pointed out, the UK’s current bias towards expensive renewables is a direct result of energy secretary Chris Huhne’s unwavering faith that the price of fossil fuels can only go on rising.

That’s precisely the mistake an incoming Conservative Government made in 1979. Then oil prices peaked at $39 a barrel (the equivalent of $150 today). In the mid-1980s, however, the bottom dropped out of the oil price ‘barrel’ taking over 25 years to recover. As Helm points out, it is the peak oil and gas brigade – today, a useful ally to the green lobbies – who assume depleting resources based on then known reserves. As Helm says: “Nonsense – and some of it dangerous nonsense”.

Helm rightly asserts, “The Earth’s crust is riddled with fossil fuels” adding “there is enough oil and gas (and coal too) to fry the planet several times over.” And his words echo Huber and Mills’ definitive quote on the subject, “Energy supplies – for all practical purposes – are infinite”. The issue is not (and never has been) too much or too little of a given resource. It has always been whether prices are too low or too high to make extraction viable. Today, the shale gas and oil “miracle” – or rather man’s ingenuity in finding new ways to tap previously unrecoverable resources – has yet again blown a gaping hole in the peak-ist argument; as the end of year figures make only too plain.

According to EIA figures at the end of 2011, U.S. net imports of oil hit 45 percent from its high of 60 percent in 2005. That’s its lowest level since the mid-1990s. While reduced demand and greater energy efficiency played a part, a significant element is imputed to increased U.S. oil production, especially from shale-oil rich North Dakota. At the end of 2011 oil production in the ND Bakken formation hit a record high of over 600,000 barrels a day. In 2000, the formation was producing less than 100,000 barrels a day. Production here is now set to see the state outstrip California and Alaska early in 2012, making it America’s second largest oil producing state. While much of the United States is suffering economic hardship with employment at around 9 percent, North Dakota’s Bakken region has less than 2 percent joblessness. Further, the region has significant income levels, tax revenue growth, and the housing market is holding its own with the lowest number of foreclosures nationally.

The Eagle Ford oil shale field in Texas has generated 13,000 jobs and more than $500 million in salaries. All since drilling began in 2008. By 2020, Eagle Ford is projected to create up to 68,000 jobs as the formation hits the greatest oil boom in Texan history. The Tuscaloosa Marine Shale that stretches through Louisiana is estimated to hold around 7 billion barrels of oil. The impact of development on the local economy in the Baton Rouge area alone is expected to be “huge”.

Over in the north-east’s enormous Marcellus shale gas field, the economic outlook is just as dramatic. Since 2006, gas production has rocketed by 25 percent making the United States global top dog in gas production, eclipsing even Russia. U.S. natural gas prices have fallen significantly, with prices around the world holding steady as result. It doesn’t take a math professor to work out the economic benefit gained in a country seeking, in the case of oil, to break the yoke of OPEC’s dictatorial largesse, and, in the case of gas, enabling industrial electricity production to switch from coal to gas halving CO2 emissions. Not bad for a country vilified for refusing to sign the ill-fated and increasingly abandoned Kyoto Protocol.

Shale Gas: A renaissance in US manufacturing, a report by PriceWaterhouseCoopers, published in December 2011 projects a litany of associated benefits for the U.S. economy. Chief among them: greater energy affordability for industry (reducing fuel costs by as much as $11.6 billion annually through 2025), higher product demand (with evidence showing how shale gas developments have driven demand for industrial products) and, amazingly in the current downturn, around 1 million new jobs through 2025.

By the end of 2011, shale gas was directly starting to affect the markets as lower gas prices began translating into economic industrial growth; the U.S. petro-chemical industry being a significant beneficiary including the announcement of new plants Dow Chemical (two plants), Royal Dutch Shell and Norcor.

As if shale gas development wasn’t enough, in 2011 it became clear that shale and tight oil development in the ‘new Saudi’ of North Dakota even suggested the formerly unthinkable: the end of U.S. oil imports entirely. The fact is, Big Oil is in the process of re-drawing the global energy map. Upstream fossil fuel investments for some oil companies has already shifted to a 70 percent focus on OECD (Organization for Economic Co-operation and Development) countries, including the United States, Australia, Canada and Poland. The shift from a 50-50 split on investments between OECD and non-OECD countries already has the Saudis rattled. A recent report from energy consultants Wood Mackenzie confirms that Big Oil’s re-focus on the energy resources of the West places as much as a $1.7 trillion stake on the future value of hydrocarbon energy from the United States, Europe and Australia. And the headliner for the rest of the world is that shale development State-side is only part one of the broader good news story.

And all of it – and I have not even touched on deepwater prospects, oil sands, methane hydrates et al – in spite of, rather than due to, bureaucratic tinkering that persists in viewing hydrocarbons – the mainstay of energy for decades yet – as the old fuddy-duddy to be hidden in the attic. In the U.S. President Obama’s New Green Deal, as the Investor’s Business Daily editorializes, has delivered, “rancid politics, aching failure and tawdry scandal”. The Solyndra scandal merely revealed the level of corruption lending it credence. Equally, the new EU Energy Roadmap 2050 shows the EU is tenaciously holding onto its green dream in the vain hope that rising oil and gas prices will eventually make renewables commercially viable. But the shale gale is blowing an even greater hole in that hope.

While new processes allow vast new energy resources to permeate the world’s shales, the ‘biblical’ scale of the potential economic turnaround still has a way to go to permeate the mindset of policy-makers. Even so, the shale-fuelled miracle, able to part the sea of gloomy economic forecasts and reveal a path to a much happier 2012, is very real – despite the plague of bureaucrats.