For the past five years, progress in extracting gas and oil from shale deposits has been revolutionizing the energy industry in the United States.
Now, a new report by the Paris-based International Energy Agency (IEA) shows how much it could shake up the global energy market as well.
The agency predicts in its World Energy Outlook released on November 12 that the United States will become the world's biggest oil producer by 2017, overtaking current number one Russia and number two Saudi Arabia.
The IEA, an intergovernmental organization that works to ensure energy supplies for its 28 mostly Western member states, also projects that by 2030 the United States will become a net oil exporter and by 2035 will be almost self-sufficient in energy.
All these things constitute a dramatic reversal of the United States' current position in the world energy market. Today, the United States imports 20 percent of its energy needs.
According to Richard Child, the editor of the London-based energy magazine "Petroleum Argus,"
such a dramatic reversal in the United States' fortunes would alter the global energy market.
"As [U.S.] oil production rises and its demand growth is restrained by improving energy efficiency -- primarily through vehicle fuel efficiency improvements which already have been mandated -- what we will see is an increasing displacement of imports of oil which would [otherwise] have gone to the United States," Child says.
Scrambling For New Markets
Russia, Europe, and the Organization of the Petroleum Exporting Countries (OPEC) are among those due to feel the change.
Currently, Europe is heavily dependent upon Russian and Middle Eastern oil because another alternative nearby source of crude – West Africa – exports mostly to the United States. But when the United States stops importing West African crude, Europe will be able to buy more.
That would not only help diversify Europe's energy sources but also send Russia and OPEC scrambling to find new markets in Asia. The IEA predicts that by 2035 almost 90 percent of oil from the Middle East would go to Asia – compared to 60 percent today -- as China and India lead growth there.
In the eyes of some experts that could help solve energy-hungry Asia's growing supply problems.
"We are already in a situation now where the Middle East export surpluses are not big enough to cover the Asian market's import deficits," says John Mitchell
, an energy specialist at London-based Chatham House.
Something industry analysts do not expect to see is the newly shale-oil-rich United States becoming a major oil exporter.
One reason is economic. A main driver of the shale oil boom today is that oil prices are above the $80-per-barrel mark at which shale oil becomes profitable. If U.S. oil producers were to flood the global market with oil, they would risk driving their own price below that benchmark level.
But there is another problem. To massively expand shale-oil output would require drilling vast numbers of wells because individual wells are not very productive.
"An average well drilled in Saudi Arabia produces 26 times more oil than one in North Dakota, the prime shale region at the moment," says Child.
That means the United States could compete with other big exporters only by covering its landscape with rigs. It is likely that environmental concerns would prevent this from happening any time soon.
"The technology of extraction is developing very rapidly to produce methods that are much less disruptive, so there is a technology progress there," says Mitchell. "But nevertheless, I think there will be issues and there will be some states and localities that will be opposed to just opening the door to shale-oil development."
According to the IEA report, the United States will have only a temporary hold on the top spot of world oil producers.
It says U.S. oil production will drop from a peak of 11.1 million barrels per day (bpd) in 2020 to 9.2 million bpd by 2035. By comparison, Saudi Arabia is projected to produce 12.3 million bpd in 2035 as the world's biggest producer and Russia just above 9 million bpd.
By any measure, that means there will be more oil in the world than ever before in the coming decades. But prices will remain high because demand is projected to grow, too.
The IEA predicts that a rise of 1.8 billion in the world's population to 8.6 billion will lead to a rise in global oil demand by more than 10 percent by 2035.