U.S., propelled by shale, is expected to dominate oil markets for decades
Global agency sees rise to ‘undisputed leader’
The United States will be a dominant force in global oil and gas markets for many years to come as the shale boom becomes the biggest supply surge in history, the International Energy Agency is predicting.
By 2025, the growth in American oil production will equal that achieved by Saudi Arabia at the height of its expansion, and increases in the supply of natural gas will surpass those of the former Soviet Union, the Paris-based agency says in its annual World Energy Outlook. The boom will turn the United States, still among the biggest oil importers, into a net exporter of fossil fuels, the agency said.
“The United States will be the undisputed leader of global oil and gas markets for decades to come,” IEA Executive Director Fatih Birol said Tuesday in an interview with Bloomberg TV.
“There’s big growth coming from shale oil, and, as such, there’ll be a big difference between the U.S. and other producers.”
The agency raised estimates for the amount of shale oil that can be technically recovered by about 30 percent, to 105 billion barrels. Forecasts for shale oil output in 2025 were bolstered by 34 percent, to 9 million barrels a day.
The U.S. industry “has emerged from its trial-by-fire as a leaner and hungrier version of its former self, remarkably resilient and reacting to any sign of higher prices caused by OPEC’s return to active market management,” the IEA said.
While oil prices have recovered to a two-year high above $60 a barrel, they’re still about half the level traded earlier this decade, as the global market struggles to absorb the scale of the U.S. bonanza. It has taken OPEC and Russia almost 11 months of production cuts to clear up some of the oversupply.
Reflecting the expected flood of supply, the agency cut its forecasts for oil prices to $83 a barrel for 2025, from $101 previously, and to $111 for 2040, from $125 before.
Lower prices are helping to support oil demand, and the IEA raised its projections for global consumption through to 2035, despite the growing popularity of electric vehicles. The world will use just over 100 million barrels of oil a day by 2025.
That will benefit the United States as it turns from imports to exports. The country will “see a reduction of these huge import needs,” Birol said at a news conference in London. That “will bring a lot of dollars to U.S. business.”
Nevertheless, U.S. shale output is expected to decline from the middle of the next decade, and with investment cuts taking their toll on other new supplies, the world will become increasingly reliant once again on OPEC, according to the report. The cartel, led by Middle East producers, will see its share of the market grow to 46 percent in 2040, from 43 percent now.
Yet that could still change, the IEA said.
As shale has outperformed expectations so far, the IEA added a scenario in which the industry beats current projections. If shale resources turn out to be double current estimates, and the use of electric vehicles erodes demand more than anticipated, prices could stay in a “lower-for-longer” range of $50 to $70 a barrel through to 2040.
“There could be further surprises ahead,” the IEA said.
Pump jacks operating at an oil well are silhouetted against the evening sky outside Williston, N.D. According to International Energy Agency, the U.S. is rising rapidly toward becoming a net exporter of fossil fuels.