IEA: U.S. changes illustrate “intensifying” world connection

Among the analysis in the International Energy Agency’s report this week projecting the United States will lead the world in oil production by 2020 was a reference to how the natural gas boom is rippling across the globe.

Growing U.S. gas production, a result of a shale drilling rush that also is  catapulting the country ahead of all others in oil output, is undercutting European coal prices, the agency said.

Because of the surplus of cheap domestic natural gas, more American power generators are opting to use it  as a fuel instead of coal.

The widespread, price-driven shift away from coal has caused domestic coal prices to sag.

While the United States has restrictions on the export of natural gas, and no active infrastructure is currently able to ship the resource overseas, coal has long been an exportable fossil fuel.

That has led to a surge of American coal moving across the Atlantic, creating an opposite shift in power generating fuels in Europe, where gas prices are higher.

There is now growing interest in using cheap, imported coal from the United States, than higher-priced imported gas, the agency said.

While the trend has been noted in the past, the agency used it as an example to illustrate how changes in one country’s energy mix are increasingly significant elsewhere.

“No country is an energy ‘island’ and the interactions between different fuels, markets
and prices are intensifying,” the agency said in its World Energy Outlook 2012, released Monday.