US set to become world's largest oil producer by 2020

Could the US' move towards energy independence and supremacy throw a spanner in the works for some of the world's most despotic regimes?

Plenty more where that came from...
Ghaffar Hussain
On 14 November 2012 11:03

According to a new report released by the International Energy Agency (IEA), the US is set to become the world's largest producer of oil by the year 2020. The same report also predicts that the US will achieve energy self-sufficiency by 2025 and become a net exporter shortly after that.

These astonishing and potentially game-changing predictions are based on a number of recent developments that have taken place in the US energy sector.

The US has always had very large energy reserves but many of these reserves, trapped in rock and shale formations, remained difficult and very expensive to extract. It is for this reason that American energy giants, such as Exxon Mobil, preferred to invest in energy fields abroad.

However, the costs of extracting oil from rock and shale formations have dropped significantly in recent years. This has been helped by the introduction of 'hydraulic fracking', a technique that relies on pumping sand, water, and chemicals into shale formations in order to squeeze out oil. The soaring costs of importing oil have also made such extraction more economically viable and incentivised smaller energy companies to explore this area.

Previously inaccessible shale oil reserves are now starting to make their way to market, with production set to go up from 1.6 million barrels per day in 2012 to 4.2 million by the end of the decade.

Technological advancements are also reducing the energy efficiency of oil and gas consuming products, meaning the US can start to consume less and export more in the near future. 

Needless to say, this announcement must have set off alarm bells in Moscow and Riyadh, since it has profound economic and political ramifications for all major energy exporting nations. It could also help to undermine OPEC, which largely comprises undemocratic and authoritarian countries that also use their energy reserves as a weapon.

Saudi's large energy exports have allowed it to silence external and internal dissent whilst funding the export of Wahabi doctrine around the world. The rise of Salafist factions in Egypt and Tunisia in recent years is largely down to Saudi largesse.

Economically, Saudi is almost entirely dependent on its energy exports to maintain its lavish, and mostly futile, spending sprees. The rise of the US as an energy super-power may not prevent Saudi from exporting its energy but it will mean there is more competition on the market. This will lead to a drop in exports, the loss of the US as an export market, and Saudi may have to look east for business. This, in turn, will affect the country’s political clout in the west.

Similarly, Russia is acutely aware of how dependent many EU and former Soviet states, such as Ukraine, are on its gas. This gives Russia leverage and enables it to play power politics.

Russia's current economic growth is also heavily dependent on energy exports and many of its current export markets are likely to be targeted by the US in the near future. EU states would also prefer to import from the more politically stable US, hence Russia may also need to look to emerging economies, such as China and India.

These changes would mean that China and India would have to continue paying to import energy at a time when the US would be becoming self-sufficient. The result of this is not only a drop in unemployment numbers in the US but also economic growth at a time when the US fears being eclipsed as an economic super-power by its rival China. 

Despite these changes, the Middle East, and the Persian Gulf in particular, will remain strategically important to outside powers. However, China and India may now have to step in in order to prevent the powder keg from exploding and neither have much experience in that regard.

Ghaffar Hussain is a counter terrorism expert and Contributing Editor to The Commentator. Follow him on Twitter @GhaffarH

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