IEA: U.S. Shale a Game Changer
Shale oil and natural gas development across the United States has been creating jobs, increasing tax revenues, and providing a clean source of fuel here at home. According to the Paris-based International Energy Agency (IEA), which released its yearly Medium Term Oil Market Report this week, the development of U.S. light, tight oil is also having a significant effect on the world market.
“U.S. light, tight oil has changed the rules of the game,” IEA executive director Maria van der Hoeven said at the launch. “LTO might in fact come out stronger.”
Specifically, IEA predicts that the U.S. will be the number one source of oil supply growth worldwide up to 2020. Van der Hoeven pointed to the decision by the Organization of Petroleum Exporting Countries (OPEC) in November to keep production levels steady instead of decreasing them to balance international market trends, which she says “may have effectively turned [light, tight oil] into the new swing producer.”
“This unusual response to lower prices is just one more example of how shale oil has changed the market,” Van der Hoeven stated. “OPEC’s move to let the market rebalance itself is a reflection of that fact.”
Not only does this new status change global supply and demand curves, it also goes to show that OPEC’s role in the global market is significantly dwindling. Now, the U.S. is able to provide a long-term stable source of oil, whereas “[t]he overwhelming majority of OPEC production growth is at significant risk, depending on political instability,” according to Van der Hoeven.
It’s not the first time the IEA has predicted an expanding role for the U.S. in the international market. Its 2013 Medium Term Oil Market Report noted that a supply shock from North American oil was “rippling through global market,” a transformative shift that “will not only cause oil companies to overhaul their global investment strategies, but also reshape the way oil is transported, store, and refined.”
The most recent IEA report serves as further evidence that American shale will continue to thrive, despite what some are saying about the oil boom eminently going bust. This is actually something that the U.S. Energy Information Administration (EIA) also highlighted this week. According to the agency’s most recent Short Term Energy Outlook, released yesterday, U.S. crude oil production is projected to average 9.5 million barrels per day. That’s pretty close to the highest annual average level of production ever recorded in the U.S.—9.6 million barrels per day in 1970.
The new IEA report also supports the White House National Security Strategy released last week. According to the Obama administration, the fact that the U.S. is now the world leader in oil and gas production is also a game-changer for domestic and international energy security. Clearly, America’s status as a long-term global energy player can’t be ignored.