Economy Watch: IEA Predicts Further Boom in U.S. Energy Production
The International Energy Agency, which released the 2012 edition of its “World Energy Outlook” on Monday, predicts that the United States is well on the way to becoming the world’s top oil producer.
By Dees Stribling, Contributing Editor
The International Energy Agency, which released the 2012 edition of its “World Energy Outlook” on Monday, predicts that the United States is well on the way to becoming the world’s top oil producer. That could come as early as the end of this decade, according to the IEA, which is a Paris-based organization created during the energy shocks of the 1970s to promote energy security among its members, the industrialized nations of the world. By 2020, the report says, the U.S. might out-produce even Saudi Arabia in oil production.
The report further posits that the extraordinary growth in oil and natural gas output in the United States will mean a sea change in global energy flows, but not necessarily lower energy prices because such prices are set on international markets, responding to the world’s supply vs. its demand. Still, under one scenario outlined by the IEA, the United States becomes almost self-sufficient in energy, in net terms, by 2035. The country would then emerge as a net oil exporter, accelerating a switch in direction of international oil trade, with almost 90 percent of Middle Eastern oil exports being drawn to Asia by 2035.
Such a scenario, however, depends on a number of variables, and things might not play out as predicted (which is acknowledged by the report). Also, there’s no guarantee that U.S. demand will be low enough in future years for supply to catch up with it. The increase in U.S. oil production depends on the increased development of oil through fracking and horizontal drilling to reach reserves of hydrocarbons not previous considered extractable. Such new techniques are still relatively expensive, however, and a sustained drop in the international price of oil might slow down the nascent energy boom in North America.
Railroad traffic up, except for coal shipments
The American Association of Railroads reported on Monday that U.S. rail traffic—a broad indicator of economic activity—continues to show mixed results, and that impacts from Hurricane Sandy can be seen in decreased traffic in recent weeks. Intermodal traffic in October saw an increase for the 35th straight month, totaling 1.233 million containers and trailers, up 1.5 percent compared with October of 2011.
By contrast, carloads originated in October totaled 1.422 million, down 6.1 percent compared with the same month last year. But that drop was largely attributable to less coal being shipped. Excluding coal, carloads were up 1.9 percent for the month compared with the same month last year.
“The fundamentals of U.S. rail traffic remained roughly the same in October as in recent months,” noted association senior vice president John T. Gray in a press statement. “Weakness in coal, remarkable growth in petroleum and petroleum products, a slight slowing of growth in intermodal and autos, and mixed results for everything else.”
Wall Street had a sluggish day on Monday, which was Veterans Day Observed. The Dow Jones Industrial Average broke precisely even, while the S&P 500 was up a microscopic 0.01 percent. The Nasdaq lost 0.02 percent.