(MENAFN - Arab News) Reports by the Paris-based International Energy Agency (IEA) usually find their way to news and media organizations. After all, this is the body that advises some 28 energy consumer countries of the top leading economies around the world.
But the last World Energy Outlook released earlier this month has managed to attract more than the usual coverage. The simple reason attributes this to the IEA's new prediction that the United States is on its way to overtake both Saudi Arabia and Russia as the world top oil producer in just five years and in just three years it could overtake Russia as the top natural gas producer. It went on to add that by 2035, the US could be self-sufficient and that the whole of North America will be net oil exporter five years earlier, in 2030.
The first observation to note is that this prediction clashes with an earlier one by the same agency and as late as the last one in 2011 where at one point its prediction was restricted to the competition between Saudi Arabia and Russia on who will occupy the top post.
Another IEA prediction was putting Saudi Arabia on the lead through year 2035.
In a quickly changing environment and lack of accurate information on new significant players in the oil market like China and India, it is really hard to come up with predictions capable of drawing a realistic picture. Even the monthly reports produced by IEA or similar organizations like the Organization of Petroleum Exporting Countries (OPEC) or the US' Energy Information Administration (EIA) are subject to regular revision up or down in the next report in the following month.
Earlier last decade, while demand in the Western industrialized countries was experiencing one of its downturns, prices continued to rise in a way that was hard to comprehend at the time. Later it became clear that prices were pushed up by an unconventional source of demand: China, where there is hardly any reliable information on what was really happening, leaving aside future predictions.
However, the same prediction expects Saudi Arabia to regain its position back from the United States by 2030, where Riyadh is expected to pump 11.1 million barrels per day (bpd), while the US production will level around 10.2 million bpd, and will continue to fall to 9.2 million bpd by 2035, while that of Saudi Arabia will rise to 12.3 million bpd.
Regardless of the accuracy of these predictions, the fact is that US imports are dropping because of a combination of high oil prices and enforcing policies that helped in improving efficiency of energy use.
As a result this year alone saw a drop of 11 percent of US oil imports. But more significant is the growing domestic production thanks to technological breakthrough in terms of hydraulic fracturing,
or fracking as it is well known. When applied using water pressure and some chemicals in addition to applying horizontal drilling, it was able to release tight oil imprisoned in rocks. Places like North
Dakota and Texas became known for this type. From as little as 100,000 bpd produced through this technology more than eight years ago, production now has exceeded 600,000 bpd and is expected to top 3 million bpd within eight years, or one third of expected surge in domestic US production.
Even if these predictions come true, they carry with them some question marks that need to be answered as far the domestic scene and worldwide implications. It is no secret that the fracking breakthrough technology was made possible by one major factor: High prices. If prices are to drop as it happens in the typical market cycles, what future such production will have? The other point was referred to by Fatih Birol, IEA chief economist, who noticed that part of the US domestic surge is attributed to shale oil, where there is very little information and no clarity on how long it could last.
More important is the question about self-sufficiency and whether that illusive target will ever be achieved? In the age of globalization that sounds like recalling an outdated policy. Of all commodities, oil is really a global one where prices are determined not only by supply and demand factors, though they are and will continue to be important, but by a host of other geostrategic factors that nobody controls. That is why troubles in Nigeria will continue to have their impact onprices even in self-sufficient America.
Moreover, will the United States keep its production inside its borders to be consumed locally only? Such a policy requires a degree of isolationism that seems to be hard to come up with given the degree of globalization engulfing the world and the role the US at world stage.
