US to become largest oil exporter

The US could overtake Russia and Saudi Arabia as the world’s top oil exporter by 2024, the International Energy Agency (IEA) has predicted.

Background 

The International Energy Agency is a Paris-based autonomous intergovernmental organization established in the framework of the Organisation for Economic Co-operation and Development (OECD) in 1974 in the wake of the 1973 oil crisis. The IEA was initially dedicated to responding to physical disruptions in the supply of oil, as well as serving as an information source on statistics about the international oil market and other energy sectors.

The IEA acts as a policy adviser to its member states but also works with non-member countries, especially China, India, and Russia. The Agency's mandate has broadened to focus on the "3Es" of effectual energy policy: energy security, economic development, and environmental protection.

In early December 2018, it was reported that the U.S. had turned into a net exporter of oil, thus breaking nearly 75 continuous years of dependence on foreign oil. Reportedly, the U.S. sold overseas a net of 211,000 barrels a day of crude and refined products such as gasoline and diesel. This, compared to net imports of about three million barrels a day on average previously during 2018 and the prior annual peak of more than 12 million barrels a day during 2005, as confirmed by the U.S. Energy Information Administration.

Analysis 

In its annual oil outlook, the agency forecast rapid growth of American oil supplies to the global market in the next five years, as output from the country’s shale fields continues to surge. In February, US crude oil exports hit an all-time high, with shipments amounting to over 3.6 million barrels a day.

“The United States accounts for 70 percent of the total increase in global capacity to 2024, adding a total of four mb/d (million barrels per day). This follows spectacular growth of 2.2 mb/d in 2018,” the organization said in a statement.

Saudi Arabia’s total gross exports are predicted to stand at 9.52 million barrels a day in 2024, while US is rapidly closing the gap with the kingdom. In 2023, American oil exports will be on course to overtake Russia’s by around 0.3 million barrels. US crude shipments are projected to stand at 8.93 million barrels a day in five years – just 0.59 million less that Riyadh, and 0.24 million barrels more than Moscow.

IEA Executive Director Fatih Birol noted that the second wave of the “US shale revolution is coming,” adding that the significant rise of US’ share in global oil production and the gas trade “will shake up international oil and gas trade flows, with profound implications for the geopolitics.”

The report comes as OPEC countries and allied major oil producers led by Russia are trying to balance the oil market. The oil cartel and partners agreed to slash production in December, taking 1.2 million barrels per day off the market in order to prevent supply glut and a further slump in crude prices.

However, OPEC member Iraq, which failed to observe its commitment to the organization several times in the past, is set to reinforce its position as one of the world’s top producers, according to the IEA. Brazil, Norway, the UAE and Guyana are also set to become the biggest sources of supply growth, but their total oil output will still fall behind that of the US.

The supply growth is a positive thing in the IEA’s view, as oil demand around the world could increase by up to 1.2 million barrels per day over the next five years.

“These are extraordinary times for the oil industry as geopolitics becomes a bigger factor in the markets and the global economy is slowing down,” Birol said. “Everywhere we look, new actors are emerging and past certainties are fading.”

Assessment 

Our assessment is that President Trump’s pledge to renew fossil fuel-based industries in the US will result in the largest volume of crude oil production and refinement in the US. We believe that although this is a sign of the US reducing its dependence on foreign oil, it does not represent a step in the right direction for the world’s second largest polluter to continue promoting oil as a fuel source.