The United States will overtake Saudi Arabia as the world’s leading oil producer by about 2017 and will become a net oil exporter by 2030, according to a report released Monday by the International Energy Agency.
That increased oil production, combined with new U.S. policies to improve energy efficiency, means that the United States will become “all but self-sufficient” in meeting its energy needs in about two decades – a “dramatic reversal of the trend” in most developed countries, the report says.
“The foundations of the global energy systems are shifting,” Fatih Birol, chief economist at the Paris-based organization, which produces the annual World Energy Outlook, said in an interview before the release.
The agency, which advises industrialized nations on energy issues, had previously predicted that Saudi Arabia would be the leading producer until 2035.
The consequences are “potentially far reaching” for global energy markets and trade, the report said.
Birol noted, for example, that Middle Eastern oil once bound for the United States would probably be rerouted to China. U.S.-mined coal, facing declining demand in its home market, is already heading to Europe and China instead.
There are several components of the sudden shift in the world’s energy supply, but the prime mover is a resurgence of U.S. oil and gas production, particularly the unlocking of new reserves of oil and gas found in shale rock. The widespread adoption of techniques such as hydraulic fracturing and horizontal drilling has made those reserves much more accessible, and, in the case of natural gas, resulted in a vast glut that has sent prices plunging.
The report predicted that the United States would overtake Russia as the leading producer of natural gas in 2015.
“This striking conclusion confirms a lot of recent projections,” said Michael Levi, senior fellow for energy and environment at the Council on Foreign Relations.
Formed after the 1974 oil crisis by a group of oil-importing nations, including the United States, the International Energy Agency monitors and analyzes global energy trends to insure safe and sustainable supply.
Levi said that the IEA report was generally “good news” for the United States because it highlights the nation’s new sources of energy. But he cautioned that being self-sufficient did not mean that the country would be insulated from seesawing energy prices, since those oil prices are set by global markets.
“You may be somewhat less vulnerable to price shocks and the U.S. may be slightly more protected, but it doesn’t give you the energy independence some people claim,” he said.
Also, he noted, the agency’s projection of U.S. self-sufficiency assumed that the country would push ahead with improving gas mileage in cars and energy efficiency in homes and appliances.
“It’s supply and demand together that adds up to this striking conclusion,” Levi said.
Birol said the agency’s prediction of U.S. self-sufficiency assumed 55 percent more oil production as well as large improvements in energy efficiency and the wider use of biofuels. He added that even stronger policies to promote energy efficiency were needed in the United States and many other countries.
The report said that several other factors could also have a large impact on world energy markets over the next few years. These include the recovery of the Iraqi oil industry, which would lead to new supply, and the decision by some countries, notably Germany and Japan, to move away from nuclear energy in the wake of the Fukushima disaster.
The new energy sources will help the U.S. economy, Birol said, providing continued cheap energy relative to the rest of the world. The IEA estimates that electricity prices will be about 50 percent cheaper in the United States than in Europe, largely because of a rise in the number of power plants fueled by cheap natural gas, helping U.S. industries and consumers.
But the message is more sobering for the planet, in terms of climate change. Although natural gas is frequently promoted for being relatively low in carbon emissions compared to oil or coal, the new global energy market could make it even harder to prevent dangerous levels of warming.
The reduced U.S. reliance on coal will just mean that coal moves to other places, the report says. And the use of coal, now the dirtiest fuel, continues to rise elsewhere. China’s coal demand will peak around 2020 and then stay steady until 2035, the report predicted, and in 2025, India will overtake the United States as the world’s second-largest coal user.