The US oil and gas boom has been one of the biggest and most consequential energy stories of the last decade. And one of the best books for understanding how that boom is changing America is Michael Levi’s The Power Surge, published back in 2013. As Levi explained when I interviewed him last year, his book was actually about two different energy revolutions going on in the United States — each with its own set of supporters. On the one hand, US oil and gas production has been surging since 2005, thanks to hydraulic fracturing and other drilling techniques. At the same time, alternative energy sources like wind power and electric vehicles have been making surprising advances. Different camps often claim that one or the other technology is the best solution to America’s energy and climate woes. Levi’s book, meanwhile, looked at how these trends could fit together to achieve certain goals. Yet it was unclear how this battle would ultimately shake out. Environmentalists and energy companies were at an impasse over how best to deal with the water and air pollution caused by fracking. It was also uncertain whether the glut of cheap shale gas would help tackle climate change (by displacing coal) or make things worse (by undercutting clean energy). Since the book came out, more than a year has passed — and quite a lot has changed. So, recently, Levi decided to write a new epilogue for the paperback edition of his book, looking at some of the more unexpected energy developments over the past year — like the emergence of Tesla or the disruptive rise of rooftop solar power. (He listed a few of them over at his blog.) I caught up with Levi — who is the David M. Rubenstein Senior Fellow for Energy and the Environment at the Council on Foreign Relations — to revisit what we’ve learned about how the oil and gas boom is changing America. A transcript is below: Brad Plumer: Let’s start with the big picture. It’s been 8 or 9 years since the US oil and gas boom began — since companies began using fracking to unlock new supplies of oil and gas from shale rock in places like Texas and North Dakota. So what would you say have been the biggest consequences? ML: At the most basic level, we’ve flipped expectations about US oil supply and natural gas supply on their heads. There’s no question that that’s the biggest piece. One thing that’s been surprising, though, is that oil prices have remained near record highs over the past few years. And the best explanation for that it’s been a coincidence. We’ve had surprising US gains in production that have been offset by surprising losses elsewhere, due to geopolitical disruptions [in places like Libya, Iraq, and Iran]. So oil prices have stayed relatively high: (NASDAQ) And that explains in part why you’re also seeing large gains in other energy sources, too, or in efficiency. We’ve had this oil and gas boom but we still preserved the environment in which people need to worry about energy scarcity. Gains in production have been offset by geopolitical disturbances As for impacts, a lot of people are still struggling to grapple with the consequences of this boom. One big question is how does increased US production of oil and gas affect the standing of the United States in the world and its ability to influence world events. So whether that’s the role of natural gas in putting pressure on Russia or the role of oil in making it easier to impose sanctions on Iran, there’s still a lot of debate about this. The second thing people are struggling with is how to react to this boom while remaining serious about climate change. We’re still trying to understand whether natural gas can be a "bridge fuel" or a waste of time. Policymakers and activists are trying to figure out whether going after and restricting fossil fuel production is a useful way to reduce emissions. There’s still enormous controversy in all those areas. The one place where there’s now more agreement is around the economic implications. There’s a broad sense among people who study these issues that the oil and gas boom is one of several important drivers for the US economy right now, and it’s beneficial, but it’s also not transformational. BP: The book came out in 2013 — and you were largely writing it before then. So what has changed in the US energy landscape since then? What have been the biggest surprises that your book didn’t mention? ML: I’d say there have been at least four large things that have happened. 1) First, the continuation of the tight oil boom [in places like North Dakota, Montana, and Texas]. My book talked about lots of different ways US oil production could increase — from Alaska, from offshore drilling — it didn’t just focus on the tight oil boom. But the strength of the tight oil boom since then has been extraordinary. When I sent this book to the printer in early 2013, we hadn’t seen our first one-year record for US oil production gains in 2012, and we hadn’t seen the second record in 2013. And that’s been due to a combination of technology and the fact that we’ve seen sustained high oil prices. (Energy Information Administration) 2) The second surprise has been the success of Tesla. I wrote in the book about electric cars and I emphasized that for the next decade, the big declines in US fuel consumption would come from improvements in conventional automobiles. And I still think that. But in barely more than a year, we’ve seen Tesla posting its first quarterly profits, selling thousands of cars in a quarter, winning all sorts of awards, regularly reaching new heights for share prices. That’s changed people’s sense of whether a fledgling automobile company can be a real player. There are still big questions around Tesla, but it’s one case that gives people something more tangible to grapple with. And it’s a good reminder that technology is tough to predict. 3) Third, the residential distributed solar market has taken off. What’s fascinating there is that you’ve had rapid growth driven not so much by technology but by changing business models and financing models. People have figured out how to sell solar more effectively. I talked a lot about wind in the book and about centralized solar, but not so much about distributed solar. And we’ve seen this almost perfect storm of financial innovation, a favorable regulatory environment, and cheap panels. That’s gotten the notice of the big utilities who are afraid it will disrupt their business model. 4) The fourth, is the slight flagging of the natural gas boom. Careful market watchers expected 2012 to be a high point, when gas was ridiculously cheap and pushed out enormous amounts of coal. But coal clawed back a bit last year. That shouldn’t have been a surprise — gas prices were unnaturally low in 2012 — and it’s not an indication of long-term weakness in the idea that US gas production can keep growing. But it’s a useful corrective to the idea that the gas boom would take care of country’s climate problem all by itself. 5) Also, when I wrote the book, I included a bunch of "wild cards." I asked what would happen if the US wasn’t in a cyclical economic downturn that was going to pop back to normal pretty soon, but if we had much much more serious structural problem with economic growth. That could change our analysis of the boom. And if you believe Larry Summers on "secular stagnation," he’s saying that we are in an environment where growth is weak for reasons that are not cyclical. And the corollary of that is that if you get big gains in oil and gas employment, it might not come at the expense of other sectors of the economy. So if that secular stagnation view is correct, it could increase our assessments of the economic benefits of this boom. BP: Now you mentioned that oil and gas boom can sit uneasily beside concerns about climate change. How do you think about how these fit together? ML: My broad philosophy, and this argument was at the heart of the book, is that you want as many energy options as you can get. That includes technological progress that enables you to get more oil and gas. But you need to use them intelligently if you want to tackle climate change. So on the gas front, I really do think we have done that intelligently. Since the book first came out, we’ve seen a big push by the Environmental Protection Agency on carbon-dioxide regulations for existing power plants that would not be remotely the same if not for the gas boom. There have been studies showing that policies and regulations are more important than natural gas for cutting emissions. And those are persuasive. But you have to ask, does the emergence of a cheap, reliable option for cutting emissions make regulators more willing to force power plants to cut their emissions? And the answer is yes. We’re seeing that play out. What worries me is that policymakers don’t have the next step of the game in mind. That means not just pushing more gas into the system but also moving toward more zero-carbon energy. On the oil side, I continue to believe that our greatest leverage lies in reducing demand. So efforts to curb supply are often going to produce a whack-a-mole phenomenon, where if you suppress supply in one place, it will pop up somewhere else because the demand is still there. That said, I am less confident than I was when the book came out that changes in US supply are going to be offset by changes in supply elsewhere. The more time I spend thinking about oil production decisions, especially in countries where oil-supply decisions are heavily shaped by politics, the less confident I am in my ability to predict where it will go. BP: Okay, but what about methane? The conventional view is that the shale-gas boom has helped push down US carbon-dioxide emissions because it’s displaced dirtier coal. But there’s also the worry that methane leaks from fracking could offset the carbon benefit from natural gas. ML: I actually think methane is mostly a red herring here. Methane is bad, no doubt, and reducing methane emissions makes gas better for climate change. But that is separate from the question of whether methane might make gas as bad for climate change as coal. I haven’t seen anything to make me think that that is genuinely possible. If you talk to scientists who study this [see this study for a review], you don’t find people who believe that methane could make gas as bad for climate change as coal. I also think the methane debate is a distraction from a much more important climate issue. At this point, further increasing the abundance of natural gas doesn’t go very far toward reducing US emissions. More gas would not only displace coal, but it would also start displacing zero-carbon fuels. That means the US will have to use policy to keep driving emissions down. The focus on methane is convenient for people who want to demonize gas. But it’s also convenient for a lot of the companies, because there’s a technical fix. It keeps us away from the much bigger question, which I grappled with in the book, about how the gas boom fits into a broader transformation of energy system, which involves economic and political and technological shifts. Which is ultimately what we need to grapple with if we want to deal with climate change. BP: Now your book looks into the question of how the US oil and gas boom might affect foreign policy. Has this come to pass? It seems like there’s a case to be made that the US oil boom increased our willingness to put sanctions on Iran’s oil exports. ML: I think you can make a good case, and I tried to in my epilogue, that the US oil boom has allowed the United States to pursue sanctions against Iran without major repercussions and economic disruptions. I think analysts go badly wrong when they take that episode and conclude that we’ll now have an easier time in general imposing oil-related sanctions on other countries. The US oil boom essentially surprised markets so much that it created unexpected space to pull Iranian oil off the markets without major disruptions. But the US oil boom is no longer a surprise. The most surprising thing that could happen now is for the US oil boom to fall short of expectations — and that would have the opposite effect of what we’ve seen so far. BP: And the other big related foreign policy question we hear a lot about these days is Russia. There’s the question of whether increased US natural gas exports to Europe could somehow weaken Russia’s influence there. How do you think about that question? There was some nice work from Columbia a couple of weeks ago showing that future US shale gas exports could cause Gazprom to lose 18 percent of its revenues. That’s a big deal for Gazprom, although it’s not a huge deal for the Russian state budget. But you would expect US gas wherever it goes to hold down prices and make Russia a little bit poorer. So that matters. Still, it’s tough to see a large fraction of US gas physically going to Europe, because this is a commercial asset, and it’s commercial decisions that determine where all that gas will go, and the money is to be made by shipping the gas to Asia. So I have a hard time seeing how US gas could physically replace Russian volume in European markets and fundamentally change European policymakers’ outlooks. It can help at the margins, it’s certainly more relevant than oil exports — where you’ve seen recently European claims that liberalizing US oil exports provide wonderful geopolitical benefits in the Europe-Russia relationship. The reality is that it would mostly help some low-tech European refineries remain in business. BP: In terms of looking forward, what are the different ways the US oil and gas boom could play out? ML: It’s always useful to separate your view of the physical future, what will be produced, and your view of the implications. So the big questions around future US production involve the global price environment. That can have an enormous impact on US output. So, for instance, how will other big oil-producing countries respond if US oil production continues to grow. Will they curb their own supplies to keep prices high? Or will they continue to produce at current levels to push prices down? The one question that I do think is overdone is what happens with US oil export policy. I think that the studies that claim an enormous difference between US production with exports and US production tend to understate the ability of current US pipeline and refining infrastructure to deal with a continued export ban. BP: And what about possible future consequences if the oil and gas boom continues? ML: I think there are a few big questions. First, what’s going to happen to policy for alternative sources and for energy efficiency? One way the oil and gas boom can have consequences is by changing prices and incentives. But it can also change policymakers’ attitudes. So we talk about Tesla, we talk about solar, it remains an open question about how this sense of abundance will affect the importance that policymakers place on all these other alternatives that have done pretty well in recent years. That goes for the rest of the world too. Most analyses of the impact of US natural-gas exports have been focused on price incentives. They look at the world and say imagine the US adds more natural gas to the global markets. Price will go down a bit. Countries will react by consuming a bit more. But what happens if US gas makes other countries more confident in increasing their dependence on gas? So they shift not just their buying, but their policies? A lot of the biggest consequences of the US oil and gas boom will come as a result of policy shifts , not just direct economic dynamics. So if you want to figure out how US gas will affect global markets, you have to look at the politics of those markets, not just the economics. BP: You also mentioned that there have been a couple big surprises since you wrote the book — the emergence of rooftop solar, Tesla, the tight-oil boom. What do you think are possible future surprises? ML: I would point to three things: One is storage and batteries. If we see large gains in storage in the next decade, that would have impacts on renewables to electric vehicles. Second is the potential spread of what’s happening in US oil and gas elsewhere. Shale gas could have a huge impact in China if it could spread. They’ve had success in a limited area, and there’s a lot of disagreement over whether that area is special or an indicator of what’s to come. But if this took off in China in a big way, that would be important. The third possible surprise would be technologies that help us use gas for things that oil is typically used for. So if we have large advances in substituting gas for oil in transportation, in industry. Or if we see advances that make it easier to ship natural gas around the world. If technological advances take the gas boom and make it a large threat to the global oil market, that would lead to a host of consequences. Right now, the difference in price is so big between gas and oil that a lot of people are working on how to exploit that difference. Interview has been lightly edited for length and clarity.