According to a new report from the International Energy Agency (IEA), the United States will overtake Saudi Arabia to become the world’s largest oil producer before 2020, and will be energy independent 10 years later. Now that’s a pleasant surprise!
Note that the IEA makes this forecast despite the fact that President Obama’s moratorium on drilling offshore and on federal lands just got another “four more years.” Some forecasters believe we could become the largest oil exporter as early as 2017 if Obama’s restrictions were lifted, which is not likely. But that’s another story!
The recent resurgence in oil and gas production, and efforts to make the transport sector more efficient, are radically reshaping the nation’s energy market, said the IEA in its latest “World Energy Outlook” report on Monday. Furthermore, the IEA projects that North America will become a net exporter of oil by 2030. Specifically, the IEA stated:
“The United States, which currently imports around 20% of its total energy needs, becomes all but self-sufficient in net terms – a dramatic reversal of the trend seen in most other energy importing countries.”
The US is experiencing an oil boom, in large part thanks to high world energy prices and new technologies, including hydraulic fracking, that have made the extraction of oil and gas from shale rock commercially viable. From 2008 to 2011, America’s crude oil production jumped 14%, according to the US Energy Information Administration. Natural gas production is up by about 10% over the same period.
According to the IEA, US natural gas prices will rise to $5.5 per million British thermal units (MBtu) in 2020, from around $3.5 per MBtu this year, driven by rising domestic demand rather than a forecast increase in exports to Asia and other markets. Further, the IEA states:
“In our projections, 93% of the natural gas produced in the United States remains available to meet domestic demand. Exports on the scale that we project would not play a large role in domestic price setting.”
North America’s growing role in the world energy markets will accelerate a change in the direction of international oil trade toward rapidly growing Asia, and will underscore the importance of securing supply routes (read: Iran) from the Middle East to China and India.
The IEA said it expects global energy demand to increase by more than a third by 2035, with China, India and the Middle East accounting for 60% of the growth, more than outweighing the expected reduced energy demand in developed economies.
The IEA believes that average world oil prices will rise to around $125 per barrel (in 2011 dollars) by 2035, but they could be much higher if Iraq fails to deliver on its production potential. Iraq is set to become the second largest oil exporter by the 2030s, as it expands output to take advantage of demand from fast growing Asian economies.
New fuel economy standards in the US and efforts by China, Japan and the European Union to reduce demand would help to make up for a disappointing decade for global energy efficiency. The IEA stated:
“But even with these and other new policies in place, a significant share of the potential to improve energy efficiency — four-fifths of the potential in the buildings sector and more than half in industry — still remains untapped.”
Policymakers are still missing out on potential benefits for energy security, economic growth and the environment. The IEA report concludes:
“Growth in demand over the years to 2035 would be halved and oil demand would peak just before 2020, if governments took action to remove barriers preventing the implementation of energy efficiency measures that are already economically viable.”
Editor’s Note: I have spared you from the IEA’s annual sermon on global warming, which is also a part of its latest report. But if you feel you must read it, go to www.iea.org/publications.
Also, I will not be posting next Thursday. Let me wish you all a HAPPY THANKSGIVING!!