IEA: U.S. to Pass Saudi Arabia in Oil Production
Investing in the Global Energy Shift
The U.S. shale boom has had a huge effect on the domestic energy supply.
Though it hasn't been enough to make the nation energy independent, or even allowed the U.S. to stop importing from OPEC, it has begun a shift in the way we power our country.
But that's just the start of it.
The International Energy Agency released its 2012 World Energy Outlook today, and its findings marked major domestic energy development for the U.S.
According to the IEA, the United States will surpass Saudi Arabia to become the world's top oil producer within the next decade.
“Around 2017, the U.S. will be the largest oil producer of the world, overtaking Saudi Arabia,” IEA Chief Economist Faith Birol said at a press conference in London today. “This is of course a major development and definitely will have significant implications.”
This won't necessarily become the new normal; Saudi Arabia is expected to ramp up production past U.S. levels again by 2030. But it's still no small matter.
By 2020, the U.S. will be pumping 11.1 million barrels of oil per day to rival Saudi Arabia's 10.5 million bpd. In 2025, U.S. production will drop down to 10.9 million bpd, but this will still remain higher than Saudi Arabia's 10.8.
The shale boom and the slow yet steady acceptance of fracking has been a key driver behind this boom, and it will continue to drive oil production.
But it will also be important in the future of natural gas in the U.S. According to the report:
“In the United States, low prices and abundant supply see gas overtake oil around 2030 to become the largest fuel in the energy mix.”
And with oil production that will surpass Saudi Arabia and natural gas that will speed past oil, the U.S. could become nearly self-sufficient as early as 2035, the report suggests.
This sort of turnaround in the industry will weigh upon OPEC nations, particularly in the Middle East, but where they lose the U.S. they will gain customers from rapidly developing nations.
China, for example, will require more oil and natural gas as the nation becomes more developed, and the same will be true for its Asian neighbors.
By 2035, roughly 90% of Middle Eastern oil imports will be to Asian countries, the report states. In that same amount of time, demand will grow by one third, mainly from China, India, and the Middle East itself.
One thing the IEA also encourages is energy efficiency. Birol said at the London conference that efforts to improve efficiency so far have failed. But the world still maintains that potential, and nations should work toward energy saving – something necessary for a world that is expected to have a demand for 99.7 million barrels of oil per day by 2035.
From the IEA press release:
“North America is at the forefront of a sweeping transformation in oil and gas production that will affect all regions of the world, yet the potential also exists for a similarly transformative shift in global energy efficiency,” said IEA Executive Director Maria van der Hoeven. “This year’s World Energy Outlook shows that by 2035, we can achieve energy savings equivalent to nearly a fifth of global demand in 2010. In other words, energy efficiency is just as important as unconstrained energy supply, and increased action on efficiency can serve as a unifying energy policy that brings multiple benefits.”
Even if the U.S. doesn't remain the leader in oil production, and even if the nation cannot become completely energy independent, this shift away from Middle East dependence will be significant for the future of the global market.
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Nasdaq's Michael Vodicka recommends investing in oil stocks through six different sectors in light of this new information.
Domestic oil companies are the most obvious investments, and integrated and majors like Exxon Mobil (NYSE: XOM) and exploration and production firms like Anadarko (NYSE: APC) are the two best sectors for that type of investing, Vodicka suggests.
Investing in service providers, particularly drilling services, is another major way to get involved in the oil and gas sector, and materials companies, particularly those that provide the sand, water, and chemicals for fracking, are a good way to be indirectly involved in the hydraulic fracturing process.
Pipeline companies are the fifth sector recommended by Vodicka. Transportation infrastructure is important for moving the fuels from well site to refinery, and though rail lines are also used, pipelines are the most common. Buckeye Partners LP (NYSE: BPL) specializes in U.S. pipelines, he says.
And last but not least are the refineries themselves. This is the final point for oil and gas production, and companies like Western Refining (NYSE: WNR) have been successful as production has increased.
You can also look to North Dakota's Bakken shale, one of the nation's most successful unconventional reserves. Production has been increasing monthly, and it's not expected to slow down soon.
Domestic oil and natural gas are going to stay an important part of the U.S. energy scene for many years to come. Our petroleum reserves and the technology used to tap them will be enough to cause a shift in the global industry.
That's all for now,
Energy & Capital's modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends. For more on Brianna, see her editor's page.