Reflecting on IEA predictions



Alsir Sidahmed

Published — Sunday 25 November 2012

Last update 25 November 2012 6:19 am

| نسخة PDF Print News | A A

Reports by the Paris-based International Energy Agency (IEA) usually find their way to news and media organizations. After all, this is the body that advises some 28 energy consumer countries of the top leading economies around the world.
But the last World Energy Outlook released earlier this month has managed to attract more than the usual coverage. The simple reason attributes this to the IEA’s new prediction that the United States is on its way to overtake both Saudi Arabia and Russia as the world top oil producer in just five years and in just three years it could overtake Russia as the top natural gas producer. It went on to add
that by 2035, the US could be self-sufficient and that the whole of North America will be net oil exporter five years earlier, in 2030.
The first observation to note is that this prediction clashes with an earlier one by the same agency and as late as the last one in 2011 where at one point its prediction was restricted to the competition between Saudi Arabia and Russia on who will occupy the top post.
Another IEA prediction was putting Saudi Arabia on the lead through year 2035.
In a quickly changing environment and lack of accurate information on new significant players in the oil market like China and India, it is really hard to come up with predictions capable of drawing a realistic picture. Even the monthly reports produced by IEA or similar organizations like the Organization of Petroleum Exporting Countries (OPEC) or the US’ Energy Information Administration (EIA) are subject to regular revision up or down in the next report in the following month.
Earlier last decade, while demand in the Western industrialized countries was experiencing one of its downturns, prices continued to rise in a way that was hard to comprehend at the time. Later it became clear that prices were pushed up by an unconventional source of demand: China, where there is hardly any reliable information on what was really happening, leaving aside future predictions.
However, the same prediction expects Saudi Arabia to regain its position back from the United States by 2030, where Riyadh is expected to pump 11.1 million barrels per day (bpd), while the US production will level around 10.2 million bpd, and will continue to fall to 9.2 million bpd by 2035, while that of Saudi Arabia will rise to 12.3 million bpd.
Regardless of the accuracy of these predictions, the fact is that US imports are dropping because of a combination of high oil prices and enforcing policies that helped in improving efficiency of energy use.
As a result this year alone saw a drop of 11 percent of US oil imports. But more significant is the growing domestic production thanks to technological breakthrough in terms of hydraulic fracturing,
or fracking as it is well known. When applied using water pressure and some chemicals in addition to applying horizontal drilling, it was able to release tight oil imprisoned in rocks. Places like North
Dakota and Texas became known for this type. From as little as 100,000 bpd produced through this technology more than eight years ago, production now has exceeded 600,000 bpd and is expected to top 3 million bpd within eight years, or one third of expected surge in domestic US production.
Even if these predictions come true, they carry with them some question marks that need to be answered as far the domestic scene and worldwide implications. It is no secret that the fracking breakthrough technology was made possible by one major factor: High prices. If prices are to drop as it happens in the typical market cycles, what future such production will have? The other point was referred to by Fatih Birol, IEA chief economist, who noticed that part of the US domestic surge is attributed to shale oil, where there is very little information and no clarity on how long it could last.
More important is the question about self-sufficiency and whether that illusive target will ever be achieved? In the age of globalization that sounds like recalling an outdated policy. Of all commodities, oil is really a global one where prices are determined not only by supply and demand factors, though they are and will continue to be important, but by a host of other geostrategic factors that nobody controls. That is why troubles in Nigeria will continue to have their impact on
prices even in self-sufficient America.
Moreover, will the United States keep its production inside its borders to be consumed locally only? Such a policy requires a degree of isolationism that seems to be hard to come up with given the degree of globalization engulfing the world and the role the US at world stage.

What's happening around Saudi Arabia

ALKHOBAR: A power failure at the King Fahd Causeway on Wednesday night resulted in a massive traffic congestion, even as officials failed to explain the cause of the snag, local media reported.A power outage for 74 minutes on the link between the Kin...
JEDDAH: A female Saudi lawyer was able to get a stay order on a ruling by the general court in Jeddah that awarded custody of a two-year-old girl to her father. She successfully argued to get the court order reversed that gave custody back to the mot...
JEDDAH: The Commission for the Promotion of Virtue and the Prevention of Vice (Haia) said that combating harassment cases is part of its responsibility to promote Islamic values and morals in society.“Those harassing women will be brought to book,” s...
RIYADH: A thick layer of sand covered the city’s skyline on Saturday with a heavy blanket of dust caused by strong winds hampering visibility and creating traffic snarls on busy roads.The traffic department advised motorists to drive slowly and exerc...
JEDDAH: More than 26 million Umrah pilgrims and worshippers visited the Grand Mosque during the month of Ramadan and in the first few days after Eid Al-Fitr, thanks to a smooth transport arrangement under the guidance of Makkah Gov. Prince Khaled Al-...
AL-AHSA: An outbreak of lumpy skin disease (LSD) has been discovered in cattle in Al-Ahsa which is an area with many cows. All necessary measures have been taken to protect the livestock, said Mahmoud Al-Shuaibi of the Agriculture Department in Al-Ah...
RIYADH: An architectural masterpiece — the King Abdul Aziz Historical Center (KAHC) — in Riyadh is a huge complex dedicated solely to collecting, preserving, promoting and showcasing the history and heritage of Saudi Arabia. The KAHC is a three milli...
RIYADH: The Saudi Blind Society (Kafif) has made all preparations for the three-day workshop for the blind to be held here next week and attended by delegates from various Asian countries.Mohammed bin Suleiman Al-Shuwaiman, Kafif director general, th...
JEDDAH: The number of Saudis who took early retirement schemes last year stood at 38,647, the General Organization for Social Insurance (GOSI) has said. The Eastern Provinces got the lion's share of disbursements for retirees, amounting to SR3.8 bill...
JEDDAH: Meat and poultry topped the list of food items seized by the Saudi Food and Drug Authority (SFDA) at the border crossings for violating the health standards in the last two months.Approximately 267,137 kg of unfit meat and poultry were reject...
JEDDAH: Many sponsors and workers of small companies are struggling to get a comparatively cheaper health cover for renewal of iqama (residential permit) as the insurance companies have stopped issuing the same.The passport department has made it com...
RIYADH: Police have detained 11 Indonesian nationals, who arrived in the holy city of Makkah for Umrah a few days back.The Indonesian Religious Affairs Ministry is working closely with the Indonesian Consulate in Jeddah to assist the group of citizen...
JEDDAH: The National Committee for Bakeries at the Council of Saudi Chambers (CSC) said this Haj season would see no shortage in supplies of bakery items.The committee said there was need to increase operational labor by about 20 percent.It confirmed...
JEDDAH: Maj. Gen. Ibrahim Al Hamzi, director general of prisons, has sacked Brig. Ahmad Al Shahrani, director of Jeddah prisons, after the case of a video clip about prisoners taking heroin went viral, according to local media.Quoting informed source...
JEDDAH: Makkah Gov. Prince Khaled Al-Faisal met with leaders of security forces in the region on Thursday to discuss future plans and mechanisms to limit infiltrators from entering the holy sites via land passageways during Haj.During the meeting, he...

Stay Connected

Facebook