An enormous shift toward energy independence is on the horizon for the United States, according to the latest International Energy Agency (IEA) report.
The forecast, officially released November 12 in the World Energy Outlook 2012 (WEO), indicates the U.S. will surpass Saudi Arabia and become the world’s biggest oil producer before 2020. The Paris-based IEA predicts the U.S. will become entirely energy independent by 2030.
Founded in response to the 1973 to 1974 oil crisis and long respected for its energy market analyses and projections, IEA stated, “The United States, which currently imports around 20% of its total energy needs, becomes all but self-sufficient in net terms by 2035 – a dramatic reversal of the trend seen in most other energy-importing countries.”
The initial growth in energy production occurred with natural gas, but in the past few years the increase of oil production in certain areas, such as North Dakota’s Bakken Shale and Eagle Ford in South Texas, has created a momentous transformation.
What’s Causing This Rapid Growth?
In addition to the latest resurgence in oil and gas production, the IEA credits the significant shift toward independence to a more efficient transport sector.
Analysts say the U.S. is undergoing an oil boom which they attribute to high world prices and advancements in technology which allow the extractions of oil and gas from shale rock a commercially valuable possibility. Horizontal drilling and hydraulic fracturing, also known as fracking, have unleashed large hydrocarbon resources once thought to be unrecoverable.
According to the Energy Information Administration, crude oil production increased 14 percent from 2008 to 2011 in the U.S., from 5.1 million barrels per day to close to 5.8 million per day. During the same time period, natural gas production increased about 10 percent.
Global Implications of U.S. Leading Oil Production
According to the IEA, this significant shift in energy production will essentially redraw the global energy map, which will dramatically change the energy market and trade.
As the U.S. becomes more self-sufficient in the next few decades, the need for importing oil from elsewhere will decrease. Analysts believe this will make the U.S. a net oil exporter. It is expected this will shift international oil trade toward Asian markets, which may put a larger focus on the security of routes that connect them to the Middle East.
This new anticipated role within the world energy market is expected to alter the current direction of international oil trade toward Asia. The IEA said it projects global energy demand to grow by more than 30 percent by 2035, with the Middle East, India and China responsible for 60 percent of the increase.
In addition, it is expected Iraq could become the second largest oil exporter by the 2030s as it enhances its output to rise to the needs of fast-growing Asian economies.
IEA’s chief economist Fatih Birol told the Financial Times, “The U.S., which imported a substantial chunk of oil from the Middle East, will be importing almost nothing from there in a few years’ time. That will have implications for oil markets and beyond.”
The IEA has also projected slower nuclear power growth in the future, a movement which is believed to mirror the retreat from nuclear energy after the Fukushima tragedy last year.
Some Analysts Disagree With Predictions
Not all analysts agree the U.S. oil boom will continue to grow at the pace predicted by IEA. The forecast is based on the continued growth of sale oil production which some view as questionable since the expansion is in its early stages.
Analysts also point out that environmental water use limits and new regulations from the U.S. Environmental Protection Agency could be detrimental to anticipated growth. Water restrictions would be challenging to overcome as water is required for fracking.
Another concern brought up by some analysts is that the U.S. pipeline network would require a substantial investment, as it is not currently sufficient to transport oil from an influx of newly opened fields.
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at firstname.lastname@example.org.
- Weisenthal, J. (2012, November 12). The U.S. Will Be the World's #1 Producer Of Oil Before 2020, And A Net Exporter By 2030. Business Insider. Retrieved from http://www.businessinsider.com/iea-the-us-to-become-the-worlds-top-oil-producer-before-the-year-2020-2012-11#ixzz2C1snSY00
- Chazan, G. & Crooks, E. (2012, November 12). U.S. set to become biggest oil producer. Financial Times. Retrieved from http://www.ft.com/intl/cms/s/0/8c2bcdf2-2c9f-11e2-9211-00144feabdc0.html#axzz2C1XS73DC
- Thompson, M. (2012, November 12). U.S. to become biggest oil producer - IEA. CNN Money. Retrieved from http://money.cnn.com/2012/11/12/news/economy/us-oil-production-energy/index.html?iid=HP_LN
- International Energy Agency. (2012, November 12). World Energy Outlook. Retrieved from http://www.worldenergyoutlook.org/publications/weo-2012/#d.en.26099
- International Energy Agency. (2012, November 9). World Energy Outlook 2012 Factsheet. Retrieved from http://www.worldenergyoutlook.org/media/weowebsite/2012/factsheets.pdf
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