North America will become energy independent by 2020 because of booming oil and gas production, which will have consequences worldwide, according to an analysis from Wood Mackenzie.
“The decline, and eventual reversal of North American net trade will have complex impacts on global energy flows, some of which are already becoming apparent,” said Paul McConnell, senior analyst for Wood Mackenzie’s global trends service, in a statement.
The region that will feel the largest impact of declining North American demand for imports will be the Middle East, the Houston research firm said.
“The Middle East is the most sensitive to changes in oil flows,” McConnell said. “Under pressure to maintain oil revenues, and with Asia importing ever-greater volumes, the relationship between China and the key players of OPEC will become increasingly bilateral.”
Because North America will be exporting both coal and natural gas, those shipments will pull down world prices for the resources, Wood Mackenzie said.
“The geopolitical impacts of an energy independent North America cannot be fully understood without considering the rise of Chinese energy demand,” Wood Mackenzie said. “Imports into China will grow as those into North America fall and eventually reverse.”
Chinese imports may grow to such an extent that they could be drain the excess resources flowing out of North America, pushing up prices, McConnell said.
“While North American exports will provide boundaries for coal, oil and gas prices, it will be the trajectory of China’s import demand that determines when these barriers are tested,” he said.
That means that even though North America will be energy independent, it won’t be detached from the world’s energy markets, Wood Mackenzie said.
“On the contrary, the region as a whole will be dependent on others to clear excess production, and the US will be an importer of oil for the foreseeable future,” the company said. “This alone will moderate the geopolitical impact of the changing North American trade position, ensuring there is no chance of an energy isolationist, rather an energy independent continent.”