The Middle East and the Gulf were the regions that were deemed the heart of the world oil industry since the early 1950s. Saudi Arabia's oil-exporting adventure, which started almost 70 years ago, brought forward, led by Saudi Arabia, the initiative to establish the Organization of Petroleum Exporting Countries (OPEC) with 11 Arab and two Latin American countries in 1960. OPEC countries, which did not appreciate Atlantic Alliance, especially U.S., policies on Israel and the Middle East, used oil prices twice in the 1970s to intimidate the U.S. and Western Europe. This led to the U.S. taking a number of steps in the 1980s to take away OPEC's monopoly in determining oil prices, and the U.S. has strengthened global commodity markets with Chicago and New York.
The new report by the International Energy Agency (IEA), on the other hand, shows that the U.S. is now getting ready to take over the production power of OPEC and Saudi Arabia. According to the report, thanks to new drilling technologies, the U.S., which is intensifying shale oil production in Texas, is starting a new era where it will dominate the energy market on a global scale. The IEA report indicates that the U.S., Brazil, Canada and Norway will further increase their oil production, that they will multiply their incomes with oil sales and that 70 percent of growth in global oil supply will come from the increase in U.S. production. This translates to a serious weakening of both Russia and Saudi Arabia's hands in terms of dominating both production and global oil prices.
Global oil demand is expected increase by 7.1 million barrels per day during the 2019-2024 period to reach 106.4 million barrels per day and that the biggest factors in the increase in oil demand are the economic growth in Asia and the petrochemical industry in the U.S. It is predicted that the U.S., Brazil, Iraq, Norway, United Arab Emirates (UAE) and Guyana will be the countries that will make the greatest contribution to global oil supply to respond to the increase in global demand.
The IEA, on the other hand, foresees that OPEC countries will reduce their production to 380,000 barrels per day by 2024 such that the global oil prices will not decline. We will observe the economic-political consequences of the U.S. cornering Saudi Arabia, Iran and Venezuela in the global oil game.
U.S. decreasing its energy imports
During President Obama's term, the U.S., which changed its policy after more than 40 years in 2013, in addition to lifting the ban on oil and natural gas exports, has also decided to turn into an economy that will meet only 11 percent of its annual energy needs with imports by 2020 from an economy that was responding to its annual energy demand of 65 percent with imports in 2013. According to the IEA's report, this means for OPEC that not only it has lost its once biggest customer, but also that, with the rise of shale oil in the U.S., it will continue to lose its power in the global energy market until the mid-2020s.
IEA President Fatih Birol, whose remarks were included in the report, said that there might be extraordinary changes in the global oil industry in the future and that the U.S. would continue to influence the global oil market over this five-year period. As reported by the IEA, OPEC's crude oil production capacity will be reduced by the decline in Iran and Venezuela. With increasing competition, the global demand for OPEC production will not return to pre-2016 levels during the period in question.
The report highlights that even though OPEC and its leader, Saudi Arabia, got some results by keeping oil prices at a certain level via production cuts, this also stimulated shale oil production in the U.S. and led to the U.S. becoming the biggest crude oil producer. The IEA report indicates that U.S. energy growth will continue to meet 70 percent of the increase in global production capacity by 2024. The report states that daily U.S. export capacity during the period in question will pass Russia's and get close to Saudi Arabia's with 9 million barrels.
In a Financial Times news article, according to market research firm Rystad Energy's predictions, we will experience a 2019 where very shocking changes that would not have come to mind will take place in the global energy market. As stated by Per Magnus Nysveen, one of the partners at Rystad Energy, with the increase in U.S. oil and gas exports, the U.S. trade deficit will vanish and its foreign debts will be quickly paid, emphasizing that U.S. exports increased by 2 million barrels a day last year and that they will surpass that of Saudi Arabia's this year by growing by 1 million barrels a day this year. The newspaper article also states that U.S. energy gains will have a price for the environment and that Change.org has described the situation as a "climate disaster."