The International Energy Agency surprised energy market watchers and consumers when it announced in November 2012 their expectation that the United States would become the world’s largest oil producer by 2020. The agency released a report in May doubling down on their prediction, now saying that the North American oil supply impact on the world market will be as significant as the growth in the Chinese economy over the last 15 years.
The crude oil renaissance in North America coincides with the continent’s natural gas boom, which forced Henry Hub natural gas futures below $2 per million British Thermal Units (mmbtu) in April 2012. The natural gas price is still the lowest in the world, sitting at about $4 mmbtu as of today.
We discussed the situation in North America, including the impact on the energy industry, energy markets and the global economy, with James Burkhard, head of oil market research and scenarios at IHS CERA. In the video, he touches on the outlook for natural gas and crude oil, but also gives an evaluation of what led to the significant production growth for oil and gas:
I think we should also remember that this amazing situation we are in in the U.S. right now with natural gas production booming, U.S. oil production booming after many decades of decline, is not the result of policy. It’s the result of market forces, it’s the result of innovation bearing fruit. And when we think about policy we should keep in mind that this framework that the U.S. has — open investment into oil and gas, very liquid markets both for futures trading and physical markets — it’s those hallmarks of open market, open investment that have really allowed this oil and gas revolution to take place.