Signs that the US’s shale oil and gas boom are affecting competitors are already beginning to show: in May, Saudi Prince Alwaleed bin Talal cautioned Saudi Oil Minister Ali al-Naimi about the toll the US’s growing energy production could take on demand in the member countries of the Organization of the Petroleum Exporting Countries (OPEC). Oil Minister Naimi, and other oil officials in Riyadh, are downplaying the US’s impact.
An OPEC report in July exhibited that the organization’s 2012 oil export revenue achieved a record high of $1.26 trillion, profits that OPEC might not be able to maintain. Saudi Arabia is the largest global oil exporter; according to Prince Alwaleed, consumers are restricting their oil imports, causing the country to generate less than its capacity.
OPEC’s data proves that Nigeria and Algeria have also experienced a distinct decline in US exports. Algeria’s oil-export profits decreased by 6% since last year; the country recently announced that increased shale oil and gas production could require the country to reduce domestic spending. OPEC also found that Iran’s oil revenues also declined by 8% last year.
Due to increased production in countries that are not members of OPEC, OPEC predicts that its 2013 crude revenues will decrease to 29.6 million barrels per day, 600,000 barrels/day less than 2012. The group’s crude average price has been 4% less than 2012. The International Energy Agency (IEA) also predicts that OPEC’s demand will wane: in 2015 IEA expects OPEC’s crude to decrease to 29.2 million barrels/day, before beginning to slowly rise in subsequent years.
Once again technology-led revolution is happening — providing an opportunity to minimize oil imports — and helping the US with trade deficits, while also creating high-economic multipliers and high-paying domestic manufacturing jobs. More importantly, the US’s energy independence means less dependence on other countries not friendly to our national interests.
The question is — do we have the will and long-term perspective to capitalize on the opportunity?
Developed and Written by Dr. Subodh Das and Tara Mahadevan
August 29, 2013
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