International Energy Agency (IEA) reported on Tuesday that the shale oil recently found in the United States will help meet most of the world's oil demand in the next five years. It is significant to the world market as well as to the U.S. itself because it eliminates the threat of future energy shortage and reshapes the U.S energy market and its relationship with other countries.
It has been predicted that developing countries are set to consume more oil than developed countries, led by China. IEA forecasts that Chinese demand for oil will rise by 25% from 2012 to 2018. The increasing oil demand posts a threat worldwide of an oil shortage and the risk that economic growth will decline as gas and oil are the fuel for economic development. The U.S. oil boom helps ease the world oil market as American oil supply will grow by nearly 4 million barrels per day between 2012 and 2018. It is said that the shockwaves of rising U.S shale oil supply will virtually satisfy global oil demand and help boost the world economy.
Increased American gas and oil production also means more cooperation with China in the future. As the world's second largest economic entity, China has sparred with the U.S for oil in other parts of the world for a long time. Since America could produce more oil at home, it has less of need to argue with China over oil distribution creating more collaboration between the U.S. and China.
The surge in U.S. oil and gas production also changes the direction of the development of the future alternatives to fossil fuels. Rising U.S. natural-gas output and falling U.S. natural-gas price post pressures on wind and solar power development. With an increasing oil and gas supply, people think more benefits are behind the oil and gas market and are reluctant to invest in wind and solar power plants. This may prove to be destructive to the alternative energy market as little motivation exists to foster cost efficient development in these industries.
"Cheap and abundant natural gas has already facilitated the transition of the U.S. economy towards broader use of the fuel.” IEA said. However, we should also think of the environmental impact of the broader use of oil and gas. Despite the potential impact of the U.S oil boom as I discussed above, what do you think are some other side-effects of the prosperous oil supply? Let us know what you think by leaving a comment below!