IEA: U.S. to “Dominate” Global Oil Production Expansion Amid Slowing Demand Growth
The United States is poised to dominate global oil supply despite an expected slowing down of global demand, meaning that U.S. oil production has a sound and prosperous future, according to a recent International Energy Agency report.
The new report, which provides a medium-term outlook of the “evolving oil supply and demand dynamics through to 2028”, forecasts a slowdown in global oil demand as the result of multiple trends: post-COVID economic recovery, Russian invasion of Ukraine, and an accelerated energy transition towards renewables and other low-carbon sources.
However, the report also highlights how supply growth is concentrated in the Americas, including the United States, Brazil and Guyana, representing more than 80 percent of the growth through this period.
Growth in Global Oil Demand to Slow Down
While the IEA touts the idea of “peak oil” demand by 2028, due to clean energy accelerating faster than investments in fossil fuels, this wouldn’t be the first time an organization or outlook predicts peak oil demand. Throughout history – from when President Jimmy Carter announced to the world in 1978 that the world was running out of oil to pre-Shale Revolution theories that oil had peaked – several have forecast that the world has reached (or will soon reach) its peak oil production and demand, but none of these predictions have come true.
As reported by E&E News, trying to determine when the world will reach peak oil demand is like looking into a crystal ball:
“The timing of peak oil demand has long been a topic of debate. A report last year from consulting firm McKinsey & Co., for example, estimated that global oil demand could peak between 2024 and 2027. Another report, issued in January 2023 by BP PLC, said oil will still “play a major role in the global energy system for the next 15-20 years.”
To be clear, the IEA still expects oil demand to grow by 6 percent in the next 5 years with 90 percent of that growth expected to be in the Asia Pacific region. Notably, the Chinese petrochemical sector is expected to account for nearly half of that rise in oil demand, while post-pandemic air travel is another major factor.
Future Oil Supply on U.S. Hands
In contrast to the demand forecast, the IEA expects the United States to lead the expansion in global oil production. Much of the global increase in crude oil production will come from the Americas, with exports predicted to increase by 4.1 million barrels per day (mb/d) by 2028. The country alone is set to provide nearly 45 percent of the total rise in crude oil production globally – surpassing the Middle East -, further cementing the United States as the top producer of crude oil.
Source: IEA Oil 2023 Report
Bottom Line: The United States is expected to “dominate” new crude oil production in the mid-term and is set to continue on this growth trajectory. This represents an opportunity to continue supporting cleaner and reliable U.S. oil production, while also helping supply affordable energy for consumers in the United States and worldwide.