In a turnaround that would have seemed far-fetched a few years ago, the United States is projected to surpass Saudi Arabia as the world’s top oil producer by 2020 while cutting its own energy use faster than any other nation, the International Energy Agency reports.
The agency’s World Energy Outlook 2012 published Monday projects the U.S. to remain the world’s top oil producer until the late 2020s. Experts said that would be an economic boon for the national and the Houston economies.
The energy agency cited a combination of industry innovations and government efficiency mandates for the coming changes in the U.S., far different from the era of shrinking oil production and gas-guzzling SUVs in the early 2000s.
Still, world oil demand was forecast to grow steadily, reaching 99.7 million barrels a day by 2035, up from 87.4 million barrels a day in 2011. China alone accounts for 50 percent of the net increase in world oil demand by 2035, the agency said.
And although the U.S. will shrink its per-capita use of fossil fuels, the nation will remain among the highest energy users in the world, the report said.
New fuel-efficiency standards for automobiles championed by the Obama administration – new cars and light-duty trucks must average 54.5 mpg by 2025 – along with increased usage of renewable energy and biofuels, will cut the nation’s per-capita use of fossil-fuel energy 17 percent between 2010 and 2035, more than any other nation, the report said.
It also projected the dip in domestic oil demand will help slash carbon dioxide emissions in the U.S. by 19 percent by 2035, the largest expected decline of any of the 34 nations in the Organization for Economic Co-operation and Development.
“A renaissance of the U.S. energy sector is reshaping the world’s energy landscape, with far-reaching implications,” the report said.
More oil to sell
Decreasing domestic consumption and increasing production would allow U.S. energy companies to sell more of their oil elsewhere.
“It basically means we’re going to be making more money here in the U.S. off of oil production than has been anticipated,” said Craig Pirrong, director of University of Houston’s Global Energy Management Institute.
The United States relies on imports for 20 percent of its energy needs, but the report said increased production and higher vehicle-fuel standards will help make the country “all but self-sufficient” by 2035.
“By contrast, most other energy importers become more dependent on imports” in the coming years, the agency said.
The U.S. has not held the title of world’s top oil producer in earnest in 40 years. But the bigger impact would be as a net energy exporter, said Ken Medlock, a fellow in energy and resource economics at Rice University’s James A. Baker Institute.
Much of the growth in U.S. oil production and exports will depend on strong prices, fueled by growing consumption in China, Medlock said. Any serious drop in demand there could force companies to suspend expensive exploration and production operations.
“If the growth in China comes unhinged for any reason, that’s when you’ll see oil prices collapse and that would affect domestic producers in a pretty dramatic way,” Medlock said. The agency’s projections appeared optimistic and uncertain, particularly given recent history which saw the United States re-emerge as an oil producing power despite projections of a steady decline in oil reserves prior to the shale drilling revolution, experts said.
“You’re really going out on a limb when you’re making even medium-term forecasts, because the technology is so dynamic, who knows what’ll change,” Pirrong said.
The agency’s estimates for growth in U.S. production of oil and other liquid hydrocarbons is especially dramatic over the next decade, Medlock said. Daily production is forecast to grow by 23 percent, to 10 million barrels from 8.1 million barrels, between 2011 and 2015, and to 11.1 million barrels in 2020, the report said.
“You’re talking about a massive increase in just production,” Medlock said. “Yes, the capability is there, but you’ve gotta have prices remains strong enough to support it.”
Meanwhile, Saudi Arabia’s daily production will slump to 10.6 million barrels in 2020, from 11.1 million barrels in 2011, before rebounding to 11.4 million barrels in 2030, the report said.
Iraq is expected to lead the world’s oil supply growth by 2035, with its daily production capacity jumping 5 million barrels, to 8.1 million barrels.