The US will drive global oil supply growth over the next five years, overtaking Russia and challenging Saudi Arabia as the world’s leading oil producer according to the International Energy Agency’s 2019 oil market forecast.
Although the rate of growth in global demand for oil is set to slow as China moves to more renewable energy sources, the US shale industry will propel America towards the number one supplier slot, upending traditional certainties in world oil markets.
Its phenomenal growth in less than a decade is partly built on the US shale industry’s ability to respond rapidly to price signals by scaling up production. It also produces a lighter crude oil which is easier and quicker to refine.
US oil production grew by 2.2 million barrels a day last year and is set to account for 70% of the total increase in global oil capacity between now and 2024, in what the IEA calls “the second wave of the US shale revolution”. The US is also expected to provide 75% of the growth in liquified natural gas supplies.
Some experts believe that, when refined products and gas are taken into account, the US may eclipse Saudia Arabia’s energy exports as early as next year. Iraq is forecast to be the world’s third largest source of new supply, offsetting sharp declines in oil exports from Iran and Venezuela.
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The balance of oil power
The geopolitics of oil are also changing as the balance of supply moves away from OPEC. Non-OPEC countries such as Brazil, Guyana and Norway are all expected to play an important role in production growth over the next five years.
Although the rise of electric vehicles will reduce demand for petrol, the IEA expects demand for aviation fuel and petrochemicals to remain strong. New emissions rules for world shipping, taking effect next year, will boost demand for cleaner, low sulphur oil and diesel.
Environmentalists have warned for some time that we are approaching “peak oil", the point at which oil extraction reaches its natural limit, after which production will decline indefinitely. The IEA says that, with demand growth slowing and more resources coming on stream, “peak oil” is still some way off.