US oil output is rising so fast with the use of new technology that the United States will likely surpass Saudi Arabia as the world’s largest oil producer in just five more years, the Paris-based International Energy Agency (IEA) said in a report Monday.
Growing supplies of crude extracted through new technology—such as hydraulic fracturing of underground rock formations—will transform the US into the largest producer for several years, but not permanently, said the IEA, a grouping of oil experts from 28 developed nations, in its annual World Energy Outlook.
“The IEA outlook feeds into the idea of a shift in the center of influence in the world oil market,” said Gareth Lewis-Davies, an analyst at BNP Paribas SA in London. “Given Saudi Arabia is willing to shift production up and down, it will retain a large degree of influence, and remain important as a price-influencer.”
The US, whose crude imports have fallen 11 percent this year, is on track to pump the most oil this year that it has produced since 1991, according to US Energy Department data.
The projection of soaring US oil output comes as Iranian oil exports have fallen 60 percent this year. Iranian officials have been saying the world cannot get along without Iranian oil. But so far it has. And as US production growth exceeds total Iranian exports, the Islamic Republic could be made irrelevant in the international market.
“Around 2017, the US will be the largest oil producer of the world, overtaking Saudi Arabia,” IEA Chief Economist Fatih Birol said at a press conference in London today. “This is, of course, a major development and definitely will have significant implications.”
The US will pump 11.1 million barrels of oil a day in 2020 and 10.9 million in 2025, the IEA said. Those figures are 500,000 barrels a day and 100,000 barrels a day higher, respectively, than its forecasts for Saudi Arabia for those years. The desert kingdom is due to become the biggest producer again by 2030, pumping 11.4 million barrels a day versus 10.2 million in the US.
The approximately 11 million barrels produced daily in the US in those years will be more than double the 5.3 million barrels a day pumped in the United States in 2008, the year of lowest US output. It will also top the 9.6 million pumped in 1970, which is the record annual output up to now for the US.
The IEA report described the US advancement toward energy self-sufficiency as “a dramatic reversal of the trend seen in most other energy-importing countries.” The nation is developing so-called tight oil reserves, especially the Bakken shale formation in North Dakota, which are extracted by hydraulic fracturing or horizontal drilling.
US oil imports will drop to about 4 million barrels a day in 10 years from a current average of 10 million because of new production and stricter fuel-efficiency standards for cars and trucks, which will curb demand, Birol said.
That drop of 6 million barrels a day in US imports exceeds total Iranian exports of 2.5 million barrels a day over the two decades until this year.
Others, especially Iraq and Canada, are also boosting output dramatically. It isn’t all coming from the United States.
But the added US and Canadian production is unlikely to undercut prices. Much of the new oil is very expensive to pump out of ground. And it wouldn’t be pumped if gasoline prices were to drop to $2 a gallon.