America is set to exceed Saudi Arabia in oil production within two years, according to a key energy body; thus transforming the world’s energy market.
According to yesterday’s annual report from the International Energy Agency (IEA) – which leads research on energy for large industrialised nations – America is now almost able to meet its own energy requirements, and is poised to overtake Saudi Arabia as the largest oil producer by 2015.
In addition, the price of gas has also plummeted within the USA, due to recent developments within the shale gas extraction industry.
Gas and industrial electricity costs are predicted to be twice as low in America compared to Europe and Japan, a trend which is expected to continue as late as 2035.
A short-scale victory
Most of the increase in the USA’s oil production comes from tight oil.
This is produced in two main areas: North Dakota’s Bakken and Texas’ Eagle Ford.
However, the US Energy Information Administration acknowledged in its latest report: “Tight oil development is still at an early stage, and the outlook is highly uncertain.”
This is because, for the production of tight oil to continue at increasing rates, the industry must overcome many environmental challenges.
The fracking needed to produce tight oil created 280 billion gallons of wastewater – which is toxic, and 45,000 tons of air pollution, according to the 2012 outlook from the US Environmental Protection Agency.
The report also stated 100 million metric tons of greenhouse-damaging pollution were released.
In addition, by 2020, the oilfields of Texas and North Dakota will be past their prime, and the Middle East is expected regain its dominance in the international market.
Amongst other reasons, this has led the IEA to state in their report that future of oil production still lies with Opec – the Organisation of the Petroleum Exporting Countries.
“We do not expect this trend will continue after the 2020s. It will come to a plateau and decline, as a result of the limited resource base of light tight oil,” noted Fatih Birol, Opec’s Chief Economist.
He continued: “Afterwards, we need a substantial increase of Middle East oil.”
The IEA also predicted a dramatic shift in energy demand over the next two decades, with developing Asia expected to match the EU for export market share in energy-intensive goods in 20 years, as energy consumption in populous India and China soars.
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