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Dramatic Changes Predicted In Energy Markets
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Drilling into Marcellus shale for oil and natural gas
Drilling into Marcellus shale for oil and natural gas in such places as Moreland, Pennsylvania, could help the United States become the largest oil producer by 2020—and a net oil exporter by 2030. Wikimedia Commons/Ruhrfisch

A new report projects the United States to become a major producer of oil and gas, while the bulk of Middle East oil is exported to Asia.

January 8, 2013—The International Energy Agency (IEA) released its World Energy Outlook 2012 in November, predicting dramatic changes in world energy markets that will see the United States become the largest oil producer by 2020 and a net oil exporter by 2030—driven by unconventional oil extraction from sand and shale.

The IEA further predicts that as demand for Middle East oil exports wanes in the United States, exports to Asia—particularly China and India—will grow dramatically. By 2035, fully 90 percent of Middle East oil will be exported to Asia, the report predicts, compared with 50 percent today.

“The global system is hugely complex, constructed of many, interconnected parts that pull and push on one another,” said Maria Van der Hoeven, the IEA’s executive director, at the London release of the report. Her remarks are available in the video World Energy Outlook 2012: Part I — Opening Remarks at www.IEA.org. “And all of these changes need to be analyzed and understood together if decisions are to be taken that put the world on track toward a secure, affordable, and sustainable energy future.”

Van der Hoeven cited natural gas as an example of the interconnectedness of energy markets. The recovery of unconventional natural gas in the United States has driven down natural gas prices in the United States to 20 percent of their import prices in Europe. As U.S. utilities have shifted away from coal to natural gas to fuel power plants, that coal is then available for export to Europe, where it presents a less expensive option to natural gas. The IEA anticipates that a growing trade in liquefied natural gas, which is far easier to transport, will reduce some of these dramatic regional variations.

“Nearly half of the increase in global gas supplies between now and 2035 is set to be unconventional gas,” Van der Hoeven said. “But this comes with a note of caution, as the unconventional gas business is still in its formative years and a global boom in production is not assured.”

The IEA predicts that Iraq will become an increasingly important supplier of oil to the global energy market, producing more than 8 million barrels per day by 2035, provided the country can develop a supply chain that can keep pace with its vast resources and ambitions.

“The Middle East is to experience a resurgence of its own with Iraq,” Van der Hoeven said. “After decades of war and instability, Iraq’s oil production is already touching new heights. And it stands as the world’s third largest exporter.”

Oil exports will potentially create $5 trillion in revenue between 2012 and 2035, averaging $200 billion per year. Without this increase from Iraq, the IEA report states oil markets would be pinched by growing demand in Asia.

The IEA projects that China, which imported about 2 million barrels of oil per day in 2000 from the Middle East, will import nearly 7 million barrels per day by 2035. India will see dramatic growth in demand as well, with imports growing from 1.2 million barrels in 2000 to nearly 5 million barrels in 2035.

In the 2011 World Energy Outlook, the IEA projected that the demand for automobiles will increase dramatically in China, where currently there approximately 30 automobiles per 1,000 residents in large population centers. That number is projected to grow to 300 automobiles per 1,000 residents by 2035. Worldwide, the population of automobiles will double to 1.75 billion by 2035.

Overall, oil demand will increase from 87.4 million barrels per day in 2011 to 99.7 million barrels per day in 2035, with increased demand for trucking accounting for 40 percent of the growth—more than offsetting fuel efficiency gains in the developed world.

The report states that coal will remain an important energy source in the global economy, with China and India pacing the growth in demand. The IEA predicts that China’s coal demand will increase until 2020 and then remain constant, while coal demand in India will grow through the period, eventually seeing the country displacing the United States as second on the list of the world’s largest coal users.

The IEA devotes a significant portion of the 2012 report to efficiency, stating that although many industrialized countries have taken major efficiency steps in recent years, 80 percent of potential gains in the building sector and 50 percent of potential gains in the industrial sector are not being pursued.

“If we simply [adopt] measures that are justified in economic terms, by 2035 we can achieve energy savings equivalent to 18 percent of global energy consumption in 2010,” Van der Hoeven said. “Saving on such scale reinforces the fact that efficiency in energy use is just as important to our energy future as unconstrained energy supply.”

The IEA, founded in response to the oil embargo of 1973-74, is an autonomous organization of 28 member countries. Originally tasked with helping countries respond to oil supply disruptions, the mission of the IEA has since expanded to include a broad range of energy issues.


 

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