The latest forecast marks a shift in the IEA’s previous thinking, which saw supply growth split between OPEC and non-OPEC countries in the medium term. The fast U.S. supply growth has diminished U.S. demand for oil from OPEC members like Nigeria, and in the long term, growing U.S. exports of oil and natural gas could further weaken OPEC, says Amy Myers Jaffe, who studies energy and the oil industry at the University of California at Davis but didn’t know the contents of the IEA report. […]As of this year, the IEA expects demand for OPEC oil to fall below 30 million barrels a day—the organization’s self-imposed production ceiling. IEA expects that trend to endure until 2018.The continuing dynamic is “a recipe for crashing prices unless OPEC countries can coordinate in restricting their production in a way they haven’t in a long time,” said Michael Levi, who studies the effects of growth in U.S. energy production for the U.S.-based Council on Foreign Relations but didn’t know the contents of the IEA report.
Cheap oil is obviously bad news for the OPEC countries, as well as states like Russia which are heavily reliant on their energy industry. But what’s most shocking is just how quickly these changes are occurring. If these countries were hoping for a long transition period in which they could gradually diversify their economies and get used to the new energy landscape, they’re probably going to be disappointed. If nothing else, this report serves as a reminder of how rapidly the shale boom is transforming the geopolitics of energy.[Oil rig image courtesy of Shutterstock]