12 Nov 2012 by Jim Fickett.
The International Energy Administration has just released its Annual Energy Outlook. This report provided some great headlines, as the IEA says the US will be the largest oil producer in the world by 2017. The Financial Times provides a more sober summary than the IEA press release:
Only five years ago it appeared that oil and gas production was on an inexorable downward trend in the US.
Now the IEA expects the country to be the world’s largest gas producer by 2015 and the largest oil producer (including other liquid hydrocarbons and biofuels as well as crude oil) by 2017. …
Before those chickens are counted, however, the industry needs to prove it can increase production the way the IEA expects. …
Above all, the newness of the industry means that there is still only limited evidence of long-term production performance.
Fatih Birol, the IEA’s chief economist, said the agency’s forecasts to 2017 were based on data about existing reserves and production, but warned that the geology and reservoir performance were “poorly known” and it was unclear whether new reserves would be found to sustain output into the future.
So, in other words, the IEA is projecting from recent production, but including as oil the natural gas liquids that desperate gas companies, losing their shirts on cheap gas, are producing to make ends meet.
The dangers of projecting from current trends can be seen by looking back a few years, at the IEA projections made in 2007. Then they warned that the US, as well as other consuming countries, would face “increased reliance … on imports of oil and gas – much of them from the Middle East and Russia.” And they foresaw expensive gas driving increased coal use in the US.
This is not to criticize the IEA, but just to say that such forecasts are to be taken with a big grain of salt.