The International Energy Agency’s (IEA) most recent report says that the U.S. will overtake Saudi Arabia to become the world’s largest oil producer by 2020 and will become a net exporter of oil by 2030. This potential shift has important ramifications for future U.S. politics and diplomacy. Most clearly, if the U.S. becomes an oil exporter there will be less need to intervene in international conflicts to protect our oil supply.
In the midst of celebrating the potential of these findings, we’d like to take a holistic look at the global energy situation and oil’s role in America’s overall energy resilience.
The IEA projections are primarily attributed to an oil and gas boom in the U.S. which has come about as a result of high oil prices which have enabled investment in new technologies like hydraulic fracturing to extract oil and natural gas from shale rock.
But how might this paradigm shift in energy production effect domestic energy issues here in America? Since its release, the IEA report has garnered hearty coverage in the news media with publications like Forbes magazine and others calling this the “tech-driven hydrocarbon revolution”.
In order to fully understand the potential implications of this report, we at Sustainable America believe that there are a few key points to keep in mind about domestic energy issues:
- As we recently outlined in a post about the coming oil production boom in Iraq, oil is a global commodity. This means that increasing production in the U.S.will not necessarily lower prices domestically. Even the IEA report notes an increase in worldwide oil demand of 1/3 by 2035, primarily due to increased demand from China, India and Middle East, notably Saudi Arabia. This translates to projected prices of $125 per barrel (in 2011 dollars) by 2035, and prices could be much higher if Iraq fails to meet projected production.
- Energy resiliency will be based on a diverse source of transportation fuels. That means that we need to increase our usage of natural gas, biofuels, electric vehicles and our overall energy efficiency. An increase in domestic oil production is not a panacea and should not be treated as such.
- Polluting emissions from the traditional hydrocarbon sources: oil, gasoline and coal, are higher than other available transportation fuels. For a truly resilient and sustainable future, we will need to focus on fuel sources that emit less pollution. Natural gas has been shown to have lower emissions than both coal and oil, making it an ideal bridge fuel while we perfect alternative fuel sources like biofuels that are closer to zero emissions. Rising use of cheap natural gas in America has been linked to a decrease in polluting emissions without any policy changes.
- The new fuel economy standards in the U.S. (CAFE standards), and other initiatives in China, Japan and the European Union are showing promising potential to increase energy efficiency, which is another important pillar of a resilient energy future for America. But the IEA report points out that there is still a lot more that can be done in this area, and governments should focus on removing barriers that currently prevent economically viable energy efficiency measures.
- And, thinking for the longer term, should the IEA predictions come to fruition, the U.S. has the potential to shift its current trade balance to a much more favorable position. If we can minimize our domestic dependence on oil through other fuels sources like natural gas and biofuels, and at the same time increase overall energy efficiency, our ability to profit from the export of high priced oil would be maximized, ensuring both energy and economic security for our nation.
Oil will always play a role in our energy economy. The forecasts contained in this report, should they turn out to be true, clearly have wide-reaching implications for the U.S. and the world. But with all the other factors in mind, we at Sustainable America believe that natural gas, electric vehicles, and continued R&D on biofuels, represent the best and most reliable means of reducing our dependence on oil. Utilizing all the best technologies to build energy resilience will be critical to a sustainable future for America.