U.S. Presidents since Richard Nixon have obsessed about American dependence on foreign oil—and have proven unable to do much about it. U.S. domestic oil production was on a long slope downwards, while the American thirst for crude—and the size of our automobiles—kept increasing. As a result, despite all the bipartisan hand wringing about imports, the U.S. just kept getting more and more dependent on foreign oil—and especially foreign oil from the Middle East, which happens to be home to a number of countries that aren’t exactly fond of us.
But now, quite unexpectedly, that’s changing. Thanks to a burst of new shale oil production in states like North Dakota and Texas—as well as conservation measures like increased auto fuel efficiency—U.S. oil imports have been falling, with the country now bringing in just 20% of its energy from beyond its borders. And if the International Energy Agency’s (IEA) new World Energy Outlook is to be believed, the U.S. may be on its way to becoming the single biggest player in the global oil market. By around 2020, the IEA projects, the U.S. will be the world’s largest global oil producer, overtaking both Russia and Saudi Arabia. U.S. oil imports will keep falling, and by around 2030 North America as a whole will become a net oil exporter. From being the world’s biggest customer for oil, the U.S. could become the world’s biggest salesman.
That’s good news for the American economy and especially its trade deficit, which would benefit significantly from wiping away the $460 billion the country spent on foreign oil last year. The burst in domestic oil will also help create well-paying jobs, especially in states like North Dakota, Wyoming and Texas, where the oil boom is centered. The continued growth of shale natural gas—along with existing supplies of coal and increasing renewables like wind and solar—means that the U.S. may well be able to meet nearly all of its energy needs itself. And so many domestic resources mean that electricity prices are likely to be much cheaper in the U.S. than in Europe, which will aid industry. But the one thing politicians most want is the one thing the U.S. still won’t be: energy independent.
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That’s because no matter how much additional oil the U.S. is able to pump in the years to come, the global oil market is just that—global. Oil is the ultimate fungible commodity, able to be shipped and piped around the world. (In fact, this portability is part of what makes oil so valuable—electricity, however it’s produced, can’t easily be transported long distances or stored for very long.) That means the price of oil is set on the global market, and—government subsidies or taxes aside—consumers in oil-exporting nations will pay about as much for crude as consumers in oil-importing nations.
That’s why crude prices—and the price at the pump for gasoline—has remained so high for U.S. consumers over the past couple of years, despite the fact that we’re in the middle of a real domestic oil boom. External events like the 2011 crisis in Libya—which took a major oil-exporting nation offline—and the tightening sanctions squeezing Iran easily outweighed the additional million or so barrels a day that shale has been able to add to U.S. supplies. Even a U.S. that can out-drill Saudi Arabia will remain subject to the global oil market—which increasingly will include the oil appetites of consumers in fast growing countries like India and China. As long as we remain utterly dependent on oil to make our cars and planes go, we won’t be able to declare ourselves free from global oil markets.
That means that one way or another we’ll still be entangled with the economics of the Middle East oil market, since even as the U.S. imports less Persian Gulf oil, other regions, like East Asia and most of Europe, will still be hooked on the stuff. Certainly, a healthier domestic oil industry means the U.S. will be better cushioned in the event of a major supply disruption from the Middle East—the energy analyst David Goldwyn notes that reduced imports mean that the Strategic Petroleum Reserve could last weeks longer than it does now—but the price of oil would still skyrocket, hurting American consumers. And in a globalized economy, we won’t be spared if painfully high oil prices cripple the Chinese or Indian economies.
Of course, like all long-term forecasts, the World Energy Outlook should be taken with a shaker full of salt. The IEA’s models assume that shale oil will keep producing well into the future, even though shale wells tend to dry out much more rapidly than conventional wells. That means oil companies need to keep drilling more and more wells to sustain output—and no one knows how sustainable that strategy is. There are also environmental concerns about the hydrofracking done to extract shale that could lead to regulations that eventually curb production. The IEA also assumes that the U.S. will keep tightening energy efficiency standards, actions that are nearly as important as increased domestic oil production to reducing total imports. President Obama’s re-election makes that more likely, but don’t forget that one major political party—that would be the Republicans—seems to be opposed on principle to conservation standards.
The IEA report is full of other useful predictions—some of them rather frightening, like the possibility that by 2017, the world’s existing energy infrastructure will likely “lock in” the world to a 3.6º F (2º C ) temperature rise. That’s the red line that many scientists have set for global warming—anything above that and we could be setting ourselves up for a world of hurt. There’s good news too—renewable energy, including hydro, is predicted to become the world’s second-biggest form of energy generation within three years, and could be threatening coal’s supremacy by 2035. But as the out-of-nowhere burst in U.S. oil production shows, new technologies and new politics can shake up even the most trusted predictions. Given how dire the forecasts for climate change look, we’d better hope there’s something out there that we can’t predict.