Surging domestic production of shale gas and oil means the United States could be virtually energy self-sufficient by 2030 according to a report released Wednesday by British Petroleum.
That could in turn have "major impacts on trade balances," the report said, as global energy demand in developing countries ramps up contributing to a 36 percent growth in overall demand.
"The outlook shows the degree to which once-accepted wisdom has been turned on its head," Bob Dudley, BP Group Chief Executive, said in a press release. "The U.S. will not be increasingly dependent on energy imports, with energy set to reinvigorate its economy. And China and India are expected to need a lot more imports to keep growing."
Significant progress in energy efficiency and fuel economy has resulted in declining oil and gasoline demand in recent years and will become "a great catalyst here," says Chris Faulkner, CEO of Dallas-based Breitling Oil and Gas.
"If America continues down the road of energy efficiency, I think we won't be the biggest consumer of oil here in the next two years," Faulkner says. "That combined with the fact that our domestic production is surging, I think by 2035, we'll be a net exporter of crude."
That's because while shale formations exist elsewhere in the world, large-scale development of those resources has only taken place thus far in North America. With previously unimaginable amounts of crude oil and natural gas locked away in shale rock across the United States, the nation is poised to become a global energy production leader, experts say—a major reversal from predictions made just a few years ago.
Shale gas and tight oil production:
"With China and India, we could see demand [America] didn't even have at its peak," Faulkner adds. "Those countries' demand is going to outpace us tremendously."
While other countries may adopt techniques currently being used in North America in the future, the report still projects the continent to dominate production of shale resources by 2030, with tight oil—crude oil trapped in shale rock formations—accounting for about 9 percent of global supplies by that time. The U.S. will surpass Saudi Arabia this year to become the largest producer of liquid fuels, the BP report noted, and according to a November International Energy Agency report, the U.S. will become the biggest oil producer by 2020, outpacing Saudi Arabia for about five years.
That's important when it comes to prospects for U.S. exports, because according to the BP report, fossil fuels will continue to be the dominant element in the world's fuel mix.
Growth in power demand by region:
Still the fate of many of these optimistic predictions hinges on factors like the future regulatory environment that governs oil and gas development in the U.S. and the potential for oil prices to plummet.
"Regulation could be a big hindrance here, as well as a drop in oil prices if, for example, Saudi Arabia unlocks the choke and floods the market," Faulkner says. "The cost of trying to develop unconventional resources, which is going to be the source of growth going forward, is much, much higher."
Costs associated with extracting shale gas and tight oil could also increase to a prohibitively high level if state and federal governments come down hard on hydraulic fracturing, a controversial practice that involves pumping millions of gallons of pressurized water, sand, and small amounts of chemicals into well heads to release oil and gas. According to Faulkner, 90 percent of the wells drilled today are ultimately fracked, and if costs skyrocket due to regulation and low oil prices, the industry could grind to a halt.
"All of this growth is going to come from tight oil or oil sands or some biofuels, and fracking is the essential tool to unlock it," Faulkner says. "We have to find a way as an industry to extract this oil out of the ground in a manner that folks feel comfortable doing."