U.S. oil production is rising sharply and increased output from shale will be a "game changer" in global energy markets in the coming years, according to a new report out Tuesday by the International Energy Agency.
"U.S. shale oil will help meet most of the world's new oil needs in the next five years, even if demand rises from a pick-up in the global economy," the Paris-based agency said in its five-year outlook, called the Medium-Term Oil Market Report.
"North American supply is an even bigger deal than we thought. A real game changer in every way," said Maria van der Hoeven, the IEA's executive director.
She said that North American production has set off a "supply shock that is sending ripples throughout the world" and urged the United States to dismantle the Export Administration Act of 1979, which bans the sale of U.S. crude abroad, except to Canada and Mexico.
"This issue is on the table. I think it has to be addressed because if there are no export licenses for crude, then the industry will find different ways, as they are looking for now already with processed, half-processed products, things like that," van der Hoeven said.
The IEA report forecasts:
"North American supply to grow by 3.9 million barrels per day from 2012 to 2018, or nearly two-thirds of total forecast non-OPEC supply growth of 6 [million barrels per day]. World liquid production capacity is expected to grow by 8.4 [million barrels per day] significantly faster than demand which is projected to expand by 6.9 [million barrels per day]. Global refining capacity will post even steeper growth, surging by 9.5 [million barrels per day], led by China and the Middle East."
As NPR's Tom Gjelten reports:
"Petroleum engineers have always known about the untapped underground oil in the United States, but it was unreachable, trapped in tight shale rock. Then the engineers figured out how to crack the rock. Hydraulic fracturing fracking got that 'tight oil' finally flowing in places like North Dakota."
Canada, one of the world's largest petroleum exporters, has also gotten oil from tar sands.
Those combined factors have resulted in a "steeper than expected" rise in North American production.
On the demand side, Gjelten reports, it's no longer the big industrialized countries such as the United States that are also the biggest oil users. The IEA predicts countries such as China and India will need more oil than the industrialized counties at "some point" in the future.
"But it's happening. And it's happening fast. It's faster than expected," van der Hoeven says.
One big reason for rising supply is that energy consumers are expected to look more toward natural gas to fill their needs. Antoine Halff, head of the IEA's Oil Industry Division, says trucks and trains, for example, will turn away from oil.
"In fact, we're now expecting that we're going to see some transition of transport demand from oil to natural gas before the end of the forecast period," Halff says.
Meanwhile, The Daily Ticker, quoting Gasbuddy.com, says the average U.S. gas price is now $3.58 a gallon, down from nearly $3.75 a year ago.
"Analysts speculate that this is the result of a rise in crude oil production and a decrease in consumer demand. 'We have seen rising crude oil inventories playing a role in lower gasoline prices,' Patrick DeHaan, senior petroleum analyst at Gasbuddy.com, tells The Daily Ticker. 'Last year there were a few major refinery incidents. Really we've had a lack of unexpected refining problems and that's kept pressure at the gas pump down.'"