The United States is poised to temporarily overtake Saudi Arabia as the world's biggest oil producer within the decade and become a net oil exporter by 2030, according to a report released Monday by the International Energy Agency.
High crude oil prices and technological advances in horizontal drilling and hydraulic fracturing have allowed energy companies to tap into vast oil and natural gas stores trapped in shale rock, which has ushered in a dramatic resurgence in the nation's output and helped reshape the global energy market.
"North America is at the forefront of a sweeping transformation in oil and gas production that will affect all regions of the world," IEA Executive Director Maria van der Hoeven said in a release.
According to the Energy Information Administration, U.S. crude oil production jumped 14 percent between 2008 and 2011, with output growing from just slightly more than 5 million barrels a day to nearly 6 million per day. Natural gas production over the same period rose about 10 percent.
High global crude oil prices have provided an incentive for companies to invest in finding and extracting unconventional sources of crude oil in North America. While supplies imported from Saudi Arabia and West Africa currently sell for as much as $110 per barrel, product from the Alberta tar sands and North Dakota's Bakken Field costs much less at around $56 to $77 per barrel respectively, says Tom Kloza, chief oil analyst at the Oil Price Information Service. The steep discount on North American crude oil has given refiners a big advantage when it comes to selling the final refined product on the global market, not to mention the rock-bottom low natural gas prices currently hovering at a fraction of those paid in most other parts of the world.
"We have become the privileged continent," Kloza adds. "Compared to the rest of the world, we have a tremendous advantage in hydrocarbon costs and that's one reason why you're seeing efforts to build from scratch new petrochemical facilities in places like western Pennsylvania, Louisiana, and Texas."
The United States' new role in the world energy market changes the dynamic of the global oil trade and could ultimately help wean the U.S. from its dependence on foreign supplies. Currently the nation imports about 20 percent of its total energy needs according to the report, but that could change by 2030, when experts project the United States to become a net oil exporter.
"Probably one of the first places we're going to back out [of] a lot [of] crude is the very expensive West African crude," Kloza says. That will have ripple effects across the world and will accelerate the shift of international oil trade toward energy-hungry Asian nations such as China and India, countries that together with the Middle East will account for 60 percent of the increase in global energy demand.
But while oil and natural gas production has ramped up a lot in recent years, when it comes to claims of U.S. energy independence within the decade, some analysts are skeptical. Part of it has to do with the existing refining infrastructure, a large portion of which is optimized to refine light sweet crude from the Middle East and North Africa or oil from Venezuela.
"The crude slate that's coming into the United States is changing," says Stephen Simko, an analyst at Morningstar Equity Research, referring to the increasing diversity of crude oils available, many of which have to be refined differently. "It's not a perfectly seamless transition by any means to take out Saudi crude and put in Canadian crude, for instance."
Simko also has some doubts about the United States' ability to keep up with the IEA's projected pace of production. A lot of the projected growth hinges on major deepwater drilling expansion in the Gulf of Mexico and the continued high performance from resources in the Bakken and Eagle Ford.
But launching a new rig in the gulf takes a lot of time and resources and production typically fizzles out relatively quickly.
"That always makes growing production harder because you have to deal with the fact that typically hundreds of thousands of barrels a day of natural decline occur in those oil fields every year," Simko adds.
Similarly, with onshore oil fields such as the Bakken and Eagle Ford, long-term viability and sustained high production rates are a concern. When companies develop a new oil resource, they typically go for the fields that are the cheapest and easiest. But projecting ahead, the nation might not see as robust production from new sites.
"When you start to look past the Bakken and the Eagle Ford, from what we've heard there's really no other place that could be the 'Bakken Part 2,'" Simko says.
One final potential fly in the ointment could be a major price drop. Although most analysts agree that crude oil prices will remain relatively high, stranger things have happened when it comes to the extreme volatility of oil prices in recent years.
"There's always the 'what about if?' and the calculus really changes if the price of crude oil drops," Kloza says. "If overseas crude drops by $30 or $40 [per barrel], there's a price point where folks that make the investments in bringing crude to market where it wouldn't make sense anymore."
- Will Gas Prices Keep Getting Lower?
- Getting Buff Could Save You Pain at the Pump
- Poll: In the Battle Over Energy Policy, Obama Leads
Meg Handley is a reporter for U.S. News & World Report. You can reach her at firstname.lastname@example.org and follow her on Twitter at @mmhandley.