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Major power shift in oil production

Accelerating production of shale gas and oil in the US has led to a large increase in declared reserves. Shale gas and oil are extracted by ‘fracking’, where water is blasted at high pressure into shale rock to release deposits trapped within it.

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This increase in production will have a profound impact on the US economy, as the country will move from being the world’s largest importer of oil to becoming a net exporter and by 2015 will overtake Russia, the world’s current largest gas producer.

However, fracking is not without its critics; environmentalists cite issues around excessive water usage, water contamination, the release of methane gas and unwanted seismic activity.

The influential International Energy Agency (IEA) predicts that within five years the USA will account for 30% of new global oil supplies. It also forecasts that they will be “all but selfsufficient” in their energy needs by 2035.

Maria van der Hoeven, Executive Director of the IEA, was quoted as saying: “North America has set off a supply shock that is sending ripples throughout the world.”

An effect of this will be much slower demand for Middle Eastern and other OPEC oil producers’ output and a likely reshaping of the whole energy industry. The global demand for oil is set to rise by 8% and it is anticipated that most of this increase will be met from non-OPEC producers.

From 2012 to 2018 the IEA expects US oil production to grow by 3.9 million barrels per day (bpd) and account for over 60% of predicted growth in non-OPEC production. OPEC, currently accounting for about 35% of global oil output, is still expected to lift production by 1.75 million bpd to 36.75 million bpd, some 750,000 bpd less than a previous IEA forecast.

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