Forget all the noise and protests about coal seam gas and fracking in the US, there’s a much more important development at work, one that could change the world as we know it.
The fracking will lift output of gas, which in turn, will push the US dollar higher, putting enormous pressure on US industry and relieving pressure on Australia, China and other economies.
The greenback’s ascent will be slow (but they will be cheering in Europe) as America’s oil imports fall as gas production rises.
In fact oil imports could halve between now and 2035, with the amount spent each year falling by hundreds of billions of dollars a year.
That in turn will cut the supply of greenbacks to the world, adding to funding pressures for regions short of the currency, such as Europe.
America is slowly but surely increasing its energy (chiefly oil) self-sufficiency because of the rising level of production of gas from new sources such as shale, tight gas from existing fields, blended ethanol and some renewable sources.
And the fracking production of gas to boost US reserves to around the 100 year level (now 8 years, but that’s up from 4 years thanks to the surge in drilling and production).
So those fears about the strength of the Australian dollar might be misplaced if you think the currency will be high for a long time.
The changes will have a slow but startling impact on world oil and gas prices, commodities generally, and on the value of the US dollar and other currencies.
In fact in an early edition of its annual energy outlook, the EIA says the US is expecting a dramatic change in energy self-sufficiency with oil imports halving over the next 20-odd years.
The Agency says it sees US dependence on imported petroleum liquids declining "primarily as a result of growth in domestic oil production by more than 1 million barrels per day by 2020; an increase in biofuels use to more than 1 million barrels per day crude oil equivalent by 2024; and modest growth in transportation sector demand through 2035.
"Net petroleum imports as a share of total U.S. liquid fuels consumed drop from 49 percent in 2010 to 36 percent in 2035.
"Proposed fuel economy standards covering vehicle model years 2017 through 2025 that are not included in the Reference case would further reduce projected liquids use and the need for liquids imports.
"Imported liquid fuels as a share of total U.S. liquid fuel use reached 60 percent in 2005 and 2006 before falling to 50 percent in 2010."
The Agency forecasts that the decline will continue, with the level of imports dropping to 36% by 2035, lower than the 42% forecast in last year’s outlook.
The EIA said that by 2035, the "net import share of total U.S. energy consumption in 2035 is 13 percent, compared with 22 percent in 2010. (The share was 29 percent in 2007, but it dropped considerably during the recession)".
That will be an enormous change in the US: at 13%, its virtual self-sufficiency for the US and with much of the imports coming from Canada, Mexico and the Western hemisphere it has considerable strategic interest as well.
America won’t be as dependent on Middle Eastern crude, a point Israel and Saudi Arabia had better heed, along with the various emirates in the Gulf.
Instead, China and Europe will be major buyers, plus other economies in Asia such as Japan, Korea and India.
Australia will be the largest energy exporter in the major industrialised economies, shipping tens of millions of tonnes of LNG to China, Japan and other Asian economies, and huge amounts of coal, uranium and some oil.
The LNG will come from a mixture of natural gas, coal seam methane and some shale gas, although much of that (from around the Cooper Basin in South Australia, the Northern Territory and Queensland) will be used to keep the existing basin fields supplying gas to much of the east coast.
According to a survey conducted last year by the EIA, Australia has the 6th largest potential reserves in the world of so-called unconventional gas, the same stuff which is changing the energy make up of America.
In the US, there’s not only the dramatic impact of the expansion in gas production, but much of it so-called ‘wet’ gas from shale and tight rock, which contains more liquids than ‘dry’ gas.
BHP Billiton has said it will push ahead with boosting its liquids production from its growing exploration areas in the US Midwest, rather than just pumping gas (where prices have slumped alarmingly in the past two years, and will remain low for years to come).
"Much of the growth in natural gas production is a result of the application of recent technological advances and continued drilling in shale plays with high concentrations of natural gas liquids and crude oil, which have a higher value in energy equivalent terms than dry natural gas," the EIA said.
Shale gas production is forecast to increase from 5.0 trillion cubic feet in 2010 (23% of total US dry gas production) to 13.6 trillion cubic feet in 2035 (or 49% of total dry gas production).
This surge will change power generation, home and industrial supplies and make more oil available for export from the south and see coal production reduced.
The natural gas share of electric power generation will increase from 24% in 2010 to 27% in 2035, and the renewables share is forecast to go from 10% to 16% over the same period.
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