Can global energy get any stormier?

Shell is selling its stake in a huge Canadian Arctic gasfield and pipeline. Already-shrinking ConocoPhillips is resigning from the oil majors by splitting itself in two. The clean-energy industry is in crisis because of politics and economics. Germany has quit nuclear energy, and Japan is discussing the same move.

What unifies these disparate events? They are more evidence of an unprecedented shakeup in global energy and the power geopolitics that flow from it.

Part of the story has been natural gas. Barely over a year ago, we were discussing how shale gas — the bonanza of new natural gas unleashed in the United States by the use of hydraulic fracturing — had roiled geopolitics in Europe by undermining Russia’s hold on the continent’s gas market. But now this shale-gas chain reaction — on top of a flood of liquefied natural gas from Qatar and Australia — is being turned in another direction by the Fukushima nuclear reactor disaster. At once, countries say they are forsaking their nuclear power programs, and soaking up the excess natural gas supply for their electricity needs. As a result, Russia’s Gazprom appears to be back in the driver’s seat in Europe, Reuters writes.

Likewise, we’ve talked about the end of Big Oil as we know it — given the politics around the world, combined with the constraints of technology, the move by ConocoPhillips is simply more recognition that these lumbering giants cannot persist as healthy entities. Shell’s move in Canada, too, exemplifies the weakening of Big Oil. Shell is getting out of this Arctic play because not all gas is equivalent — it is staying in gas elsewhere in Canada, but it knows that survival means more discipline than ever in picking and choosing one’s targets, and not trying to own everything. This is not only a commercial issue — the exercise of geopolitical power has accompanied the movements of BP, Exxon and Shell around the world. So to the extent to which they are brought low, their power gets dispersed among a multitude of state oil companies in China, Brazil, India and elsewhere.

Paradoxically, the shrinkage of Big Oil is not the best of developments, particularly in the shale gas space. I came to this conclusion on a recent swing through Mongolia, where I asked a locally based mining executive how his big global company is responding to a prior history of remarkably bad financial and environmental behavior. His response: His company isn’t the worry because, concerned about its global reputation, it is attempting to show Mongolia a different example; the bigger problem, he said, is smaller companies whose economic model calls for getting in, making their money, and getting out.

One might call this answer self-serving, but I also see the validity — in shale gas as in mining, it is the smaller players, and not the giants such as ExxonMobil and Shell, with serious reputational issues, that have less at stake in getting fracking right. When the Exxons and BPs get it wrong, they get it wrong in a massive way, as we’ve seen in the Gulf of Mexico and now the Yellowstone River. But they are also subject to a level of destructive public reaction that smaller companies do not always experience. We can see for example in the Gulf of Mexico that it is BP getting the bigger black eye and not Halliburton, Transocean or Anadarko, all of which also had a role in last year’s spill.

In Foreign Affairs, David Victor and Kassia Yanosek describe the bust (and former boom) in clean energy technology, which if unaddressed "could make some of the toughest foreign policy challenges facing the United States — from energy insecurity to the trade deficit to global warming — even more difficult to resolve." Oddly, Victor and Yanosek say that a principal part of the problem is a lack of strategic investment in innovation. One had thought that innovation was the point of all the money pouring into solar, wind, biofuels and so on over the years, but that is not necessarily the case when one is seeking a quick winner. Since a lot of serious countries are banking on technology including batteries and plug-in hybrid vehicles to help drive their future economies, such a failure to innovate could be economically lethal.

The main thing about these shifts is that they are more like squalls than directional winds. Matthew Hulbert, a Hague-based energy expert at the Clingendael International Energy Program, thinks that much of the hullabaloo about nuclear energy will dissipate along with anti-nuclear politics. Regardless of what German Chancellor Angela Merkel says today, Germany ultimately will not do away with its nuclear reactors "because the downside costs of getting rid of them are simply too high," Hulbert says. This includes the political price of far deeper reliance on Russia, on dirty coal and expensive wind. "Wipe out nukes," he says, "and they start looking even worse."

Hulbert sounds right. All we can truly conclude from Fukushima is that yet another part of what appeared fixed in today’s energy mix is actually a moving part.