Home Business IEA Sees U.S. Shale Squeezing OPEC Influence – The Wall Street Journal

IEA Sees U.S. Shale Squeezing OPEC Influence – The Wall Street Journal

16 min read

The IEA said the U.S. will account for 85% of the increase in global oil production to 2030. Oil production in North Dakota.


andrew cullen/Reuters

LONDON—Unceasing U.S. shale-oil production will reshape global energy markets in the years to come, bolstering the country’s influence over nations in the Organization of the Petroleum Exporting Countries, the International Energy Agency said Wednesday.

In its annual World Energy Outlook report, the IEA said that even as annual U.S. production growth slows from the pace seen in recent years, its forecast scenario for policies already announced mean that the country will account for 85% of the increase in global oil production to 2030.

“U.S. growth will limit the ability of traditional exporters to manage exports,” said

Fatih Birol,

the IEA’s executive director. “Countries whose economies are exclusively reliant on oil-and-gas reserves are facing serious challenges.”

The report comes as OPEC leaders and their allies are readying themselves to meet in Vienna next month to discuss continuing oil production cuts, and as Saudi Arabian Oil Co., known as Aramco, prepares for its long-awaited initial public offering.

Higher U.S. output—rising to 19 million barrels a day of production over the coming decade—will push down the share of the global oil market held by OPEC members and Russia, to 47% in 2030 from 55% in the mid 2000s, the agency said.

While “the world still relies heavily on oil supply from the Middle East” regardless of any sustainable-energy policy initiatives announced, “pressures on the hydrocarbon revenues of some of the world’s major producers also underline the importance of their efforts to diversify their economies,” the Paris-based organization said in its report.

The U.S. also will account for 30% of the increase in natural-gas production to 2025, ensuring that U.S. total shale oil and gas output will overtake that of Russia’s by then.

The IEA’s outlook report came the day before the agency was due to release its monthly market report and hours before OPEC releases its own monthly report. Both organizations cut their demand growth forecasts for 2019 in their October reports, with both citing sagging global growth and expanding U.S. shale production.

“The shale revolution highlights that rapid change in the energy system is possible when an initial push to develop new technologies is complemented by strong market incentives and large-scale investment,” the IEA’s Dr. Birol added.

The IEA’s long-term base-case scenario for the global energy market is that even with the policy action and targets outlined by leaders around the world, governments and businesses are on course to fall well short of the policy action needed to secure a sustainable-energy future and avoid the harshest consequences of climate change.

In that scenario, energy demand rises by 1.3% a year to 2040, “resulting in strains across all aspects of energy markets and a continued strong upward march in energy-related emissions,” while carbon dioxide emissions will “lock in severe impacts from climate change” by that year, even as hundreds of millions of people remain without power, the agency said.

Low-carbon sources—led by solar panels—will supply more than half of the growth, with liquefied natural gas providing another third, even though oil demand will flatten out in the mid-2030s, the IEA said.

Annual electric-vehicle sales could rise to more than 30 million in 2040 from 2 million today, the agency said, but noted that a doubling of sales of sport-utility vehicles over the past 10 years is significant because SUVs are larger, heavier, less fuel efficient, and harder to electrify.

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