U.S. poised 
to overtake 
Saudi oil 
production

The end of U.S. dependence on foreign oil is within reach.

By about 2020, the United States will overtake Saudi Arabia as the world’s largest oil producer and put North America as a whole on track to become a net exporter of oil as soon as 2030, according to a report from the International Energy Agency.

The change would dramatically alter the face of global oil markets, placing the U.S., which currently imports about 45 percent of the oil it uses and about 20 percent of its total energy needs, in a position of unexpected power. The nation likely will become “all but self-sufficient” in energy by 2030, representing “a dramatic reversal of the trend seen in most other energy-importing countries,” the IEA survey says.
U.S. politics could get in the way of these trends, though.

Controversy swirls around such climate-related proposals as carbon taxes or “cap-and-trade” initiatives, environmental regulations that hamper drilling on public lands, laws against hydraulic fracturing — also known as fracking — or other new forms of energy extraction, and political barriers to such projects as the Keystone XL pipeline — all of which could hamper U.S. energy production but are favored by environmentalists and supporters of President Obama.

The IEA report gives the oil and gas sector a powerful talking point when promoting American energy: Keep the federal government out of the way, and energy independence can become reality by the end of this decade.

“The shale boom in America is just beginning. We have an unprecedented opportunity to create millions of new jobs and generate hundreds of billions of dollars for our government. With the right public policies and government leadership, this could be a game changer for the United States,” said Carlton Carroll, a spokesman for the American Petroleum Institute. “By following through on his own executive order to eliminate overly burdensome regulations, President Obama can rein in plans to impose regulatory burdens that could cost businesses hundreds of billions of dollars and chill economic growth.”

The U.S. is the world’s third-biggest oil-producing nation at about 10.1 million barrels per day last year, a figure expected to jump to more than 11 million barrels per day by 2020, the IEA predicts. Although the U.S. imports oil, it partially offsets that by being a major exporter of coal and natural gas.

Emerging technologies such as fracking and horizontal drilling have allowed the U.S. to begin taking full advantage of its vast oil and natural gas deposits in places such as the Bakken Shale, which underlies much of North Dakota, and the Marcellus Shale, beneath Pennsylvania and other states in the eastern U.S.

“North America is at the forefront of a sweeping transformation in oil and gas production that will affect all regions of the world,” said IEA Executive Director Maria van der Hoeven.

Although the U.S. will be an oil importer for the foreseeable future, production in Mexico and Canada, with which the U.S. shares a free-trade region, will more than offset that. The promise of North American energy independence could put Mr. Obama, fresh off his re-election victory, in a delicate spot.

Throughout the 2012 campaign, he spoke favorably of more oil and gas drilling in the U.S. while pushing a long-term strategy that phases out fossil fuels in favor of renewable sources of energy, such as wind and solar power.

But many of Mr. Obama’s backers in the environmental movement are urging him to take tough action against carbon emissions and favor increased regulations, as well as the elimination of all government support, for the oil and gas industry. A carbon tax or other crushing regulations could render the IEA projections moot if the Obama administration chooses a path that makes it less profitable for companies to extract oil and gas from American lands.

The issue was a prominent part of Mr. Obama’s re-election fight with Republican Mitt Romney, who promised that, if elected, he would deliver North American energy independence by 2020 by promoting more drilling and greater use of coal. Mr. Romney also repeatedly attacked the Obama administration’s track record on energy, saying regulations had held down domestic production.

Mr. Obama responded to those attacks, as well as similar criticisms from oil and gas industry groups, by touting increases in American production. Much of the increase, however, was on private lands, where federal approval isn’t required.

The projected rise in U.S. oil production, the IEA report says, will have ripple effects around the globe. It will “accelerate the switch in direction of international oil trade towards Asia,” with Middle Eastern nations such as Saudi Arabia refocusing the bulk of its oil exports toward nations such as China, with the U.S. no longer an important customer.

But North American dominance in oil production may be short-lived. The IEA predicts that Saudi Arabia likely will reclaim its spot as the top oil-producing nation by about the middle of the next decade. Output from non-OPEC members will rise over the next few years, peaking at about 53 million barrels per day in 2015. In 2011, non-OPEC production was at about 49 million barrels per day. It will begin to fall by the mid-2020s and dip to less than 50 million by about 2035.

OPEC members are expected to raise their own oil-production levels by about 8 percent from 2020 to 2035, the study says.

Although the report predicts seismic shifts in global markets, it also confirms that fuels such as coal will remain irreplaceable for at least the next two decades. China’s and India’s demand for coal will continue to grow throughout the next decade, with India set to overtake the U.S. as the world’s second-largest user of coal by 2025.

Mr. Obama’s promise to continue investing taxpayer money into “green” technologies — wind, solar, biofuels and others — also appears to be part of a global trend.

Governments around the world subsidized renewable energy to the tune of about $88 billion last year. By 2035, government support for those fuels is expected to skyrocket to nearly $240 billion, the IEA report says.

The study also projects that, by 2035, renewable sources of energy will generate nearly one-third of total electricity output worldwide. Within just four years, the IEA projects, renewable energy, led by solar power, will eclipse natural gas and become the second-largest source of power generation, trailing only coal.