This morning, the IEA released a report announcing the U.S. would become “all but self‐sufficient” in terms of energy use by 2035 “thanks to rising production of oil, shale gas and bioenergy, and improved fuel efficiency in transport.”But we’ve spoken with some oil experts who say the report — at least the one publicly released — makes no sense.
The IEA projects U.S. oil production will rise to 10 million barrels per day (bpd) by 2015 and 11.1 million bpd in 2020 before slipping to 9.2 million bpd by 2035, according to Reuters.
But Manuj Nikhanj, the lead oil play analyst at research firm ITG, emailed us to there is no way that output alone would be able to meet U.S. demand, which already stands at 19 million barrels per day:
Do they mean energy independence on a million BTU basis including natural gas? The US consumes 19 million barrels of oil per day, so not sure how you become independent with less than 10 million barrels per day of production (based on the media chart they put out).
The only explanation, he said, is that Canada fills the void — but that’s not clear from the current presentation, he said.
Maybe Middle East is not needed because Canadian imports increase, since Middle east is less than 2 MMbbl/d.
David McColl, who covers oil and gas stocks for Morningstar, emailed us to say Canada wouldn’t be able to fill the gap either:
Consider Canada – on its own it isn’t likely to meet those needs, and they may be exporting more significant volumes overseas by 2020 as well. This means some U.S. refineries will still be relying on oil imports, which will likely be priced to international markets.
McColl says the report erroneously relies on current growth rates in shale plays. “New areas might need to be opened to achieve this (i.e. offshore),” he said.
McColl also questions the maths behind the U.S. achieving self-sufficiency:
Just because a nation is No. 1 doesn’t mean they aren’t reliant on other producers. Here is a back of the envelope illustration as to why:
1) Of that 10 million bpd number, about 2 million is liquids. Meaning, there could be roughly 8 million bpd of crude oil available for refineries; while some liquids will make its ways into refinery complexes, they are predominantly feedstocks into other industries and show up as part of the total petroleum mix of the U.S.http://www.eia.gov/dnav/pet/pet_pnp_wiup_dcu_nus_w.htm.
2) U.S. refineries currently demand about 15 mmbpd of crude oil. Assume that remains flat. (http://www.eia.gov/dnav/pet/pet_pnp_wiup_dcu_nus_w.htm)
By 2020 — when the IEA projects production to top 11 million barrels per day the U.S. “shortfall” of domestic production could still be about 6 million bpd, he says, assuming 15 million of crude refinery demand outpacing 9 million barrels of crude oil.
Finally, McColl said our increased independence will have little impact on pump prices:
…gasoline prices will still be influenced by international price movements.
In summary, it is doubtful that any of these will result in a material and long-term reduction in gasoline prices.
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