Oil Kingdom
Shale is the new peak oil, and that's why Saudi Arabia still rules global energy markets.
BY JOHN SFAKIANAKIS | AUGUST 7, 2013 FOREIGN POLICY
Reading the newspapers these days, you'd think that the much-hyped impending American energy boom is about to make Saudi Arabia and the rest of OPEC irrelevant. Recent projections by the International Energy Agency (IEA), for example, have the United States surpassing Saudi Arabia as the world's top crude oil producer by 2020, a development that would appear to call into question the kingdom's role as the world's strategic energy provider. But such projections -- based, at least in part, on the rapid discovery and development of unconventional hydrocarbon resources in the United States -- are far from ironclad. Indeed, they are built around numerous variables that could change over time, and which hardly foretell the end of Saudi Arabian energy dominance. Just as the "peak oil" debate falsely predicted that worldwide oil production had reached -- or very nearly reached -- its peak overall production, the shale oil debate is steering public opinion to the opposite extreme.
Even the IEA acknowledges that both future sources of additional crude oil and price remain big unknowns. As the IEA's chief economist, Fatih Birol, noted in November 2012, "light, tight oil reserves are poorly known... If no new resources are discovered around the world and plus, if the prices are not as high as today, then we may see Saudi Arabia coming back and being the first producer again." The U.S. Energy Information Administration, meanwhile, predicts that U.S. crude oil production will peak in 2020, placing the United States 47 percent below the IEA's projections.
Thanks in no small part to new hydraulic fracturing and horizontal drilling technologies, "tight," unconventional oil trapped in rock and sand beds is becoming more and more accessible. These improved production methods are having a major impact on the U.S. energy supply, contributing to a 43 percent increase in U.S. oil production since 2008.
