Via Meadia has been pounding the drum for some time about the new US energy boom and the geopolitical shifts it entails. This week the boom has gone mainstream. First the IEA predicted the US will overtake Saudi Arabia in oil production as soon as 2017. And now Daniel Yergin himself is endorsing the core thesis in the FT:
The US will rapidly become much less dependent on oil imports and will soon join the ranks of exporters of liquefied natural gas. This is a dramatic change from the outlook just four years ago, when Barack Obama won his first presidential election. In 2008, the expectation was for decline in US oil production and an increase in imports. This fed a pervasive sentiment that American oil’s days were coming to an end.
Instead, US oil output has risen 25 per cent since 2008 and the IEA estimates it will increase a further 30 per cent by 2020, to 11.1m barrels per day. US petroleum imports have fallen from 60 per cent of consumption in 2005 to 42 per cent today.
Yergin reminds us that the US has already passed Russia as the world’s largest natural gas producer, and that cheap gas in the US is pulling billions of dollars of investment in our direction. Yergin’s estimate of the brown jobs created since 2008: 1.7 million. If IEA predictions pan out, by 2020 the US will be the world’s largest producer of both oil and gas, with millions of new jobs in extraction and in the industries that will spring up to take advantage of this bonanza.
There is another point Via Meadia has been promoting that Yergin supports: in the United States we don’t face “peak oil” for a very long time, but we are on the cusp of “peak oil demand”—as more efficient technologies continue to cap US demand for oil even in the face of an abundant supply. Malthusian greens need to worry about something: if oil is plentiful they worry about planetary destruction due to CO2 emissions. If oil looks scarce they agonize over the coming economic collapse and the inevitable decline of the United States.
In fact, we face neither scenario. We are likely to have abundant oil and gas and also likely to use these resources carefully due to their cost.
The chattering classes and the smart set were completely wrong about America’s energy future; it will be interesting to watch how the awareness of new horizons opening up before us gradually infiltrates the conventional wisdom. At VM, we’ll be watching.