US Department of Energy pessimistic about energy independence?
| September 17, 2013
In the highly volatile oil industry, long-term predictions are always difficult and deemed to be wrong. This could be also said for the most recent energy forecasts by the U.S. Energy Information Agency, part of the U.S. Department of Energy. In its World Energy Outlook for 2013, published in April 2013, the EIA estimates that the U.S. could be energy independent by 2040, but that this is not the most likely case.
Very pessimistic, the EIA foresees in its main prediction (or reference case) that U.S. net imports will decline only till 2020 making up 34 percent of petrol consumption by 2019, and then increase again to a share of 37 percent by 2040. What to make out of this prediction?
Firstly, the EIA seems certainly more pessimistic than the International Energy Agency, which caused a little shock wave across the media when it announced in 2012 that the U.S. could be energy independent by 2030 overtaking Saudi Arabia as the largest oil producer already by 2020. How this will come about? The IEA, as one of the world-leading energy think tanks, considers that continuous development of upstream technologies can unlock ever more oil and shale resources while new fuel-efficiency measures will take over the transport sector.
Secondly, the EIA is known for being overly pessimistic and has underestimated the production potential of the U.S. before. For instance, in an interview with the FT, Edward Morse, the head of commodities research at Citigroup, says that the EIA has consistently underestimated the growth of U.S. oil production. Ironically enough, the EIA just revised its estimate for recoverable shale reserves in the U.S. from 32 billion barrels to 58 billion. (By the way, the same report states that global shale oil and gas reserves are more than enough to cover more than a decade of global consumption).
Thirdly, though the EIA does not regard energy independence as its most likely scenario, it still does not rule it out and considers a sharp drop of net imports possible. In two out of five possible scenarios, the EIA forecast estimates that U.S. net imports could fall drastically. In one case it sees U.S. net imports dropping to 7 percent out of total consumption. In the other, "no net imports" could take hold by 2040, if each shale well would yield about twice as much oil over its lifetime as today's average of 1.36 million barrels and wells would be located much closer to each other.
While this might sound improbable, Morse is confident that 10.5 million barrels of crude oil and other liquid fuels per day. Production of crude oil and other liquid fuels would have to rise by 8.6 million barrels per day to meet current energy demand.
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