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Page added on June 4, 2013
Daniel Yergin On Promise, Perils Of U.S. Oil Boom
They’re calling it a “supply shock” in the world’s energy markets. A recent report by the International Energy Agency says oil production in North America will grow so much in the next five years that it will turn the United States into a net oil exporter, transforming the global oil market in the process.
For an insight into what this means, RFE/RL correspondent Heather Maher turned to Daniel Yergin, vice chairman of IHS, a global forecasting company.
Yergin’s book, “The Prize: The Epic Quest for Oil, Money and Power” won the Pulitzer Prize and his latest book, “The Quest: Energy, Security, and the Remaking of the Modern World,” is about the search for sustainable energy resources.
RFE/RL: What did you think when you heard about the coming oil supply shock?
Daniel Yergin: I think this comes as no surprise. U.S. oil production is up 43 percent since 2008. The increase in U.S. oil production – just the increase – is equal to Nigeria’s entire oil production. So the oil supply situation is being transformed by this revolution in unconventional oil and gas that’s now unfolding in North America.
RFE/RL: Your latest book is about the quest for clean, sustainable energy sources, which oil is not. Do you see a positive to this oil glut?
Yergin: This means that the world, the global market, is going to be better supplied with oil. It means that there’s a rebalancing of world oil production that is now occurring, and it points to greater stability in the oil market and not that fear of shortage and peak oil that was causing so much difficulties for the global economy half a decade ago.
RFE/RL: Couldn’t one argue that that fear of running out of oil has been driving the push for clean and renewable energy sources, and this news puts that momentum in jeopardy?
Yergin: No, I don’t think so. I think that the “peak oil” and the fear of running out reinforced the drive for renewable energies and [helped] speed up an energy transition but, in some ways, expectations for that transition have been exaggerated beyond what it can actually deliver. It will take longer for that to happen.
RFE/RL: Is the North American oil surplus a sign of some sort of paradigm shift in the energy industry?
Yergin: It is a recognition, as in every previous period when the world was going to run out of oil – there’ve been at least five of them – [that] new technologies, new areas, open up and change the balance. But at the same time that this is happening we’re also becoming much more energy efficient. Our automobiles in the United States will get up to 54 miles per gallon within a decade or so – that’s a very big change.
So I think we’re seeing change both on the demand side — how we use energy — and on the supply side. Although on the supply side, so far this is basically a North American development, but it is – this, along with shale gas — the biggest innovation in energy so far in this century, keeping in mind that wind and solar are innovations from the last century.
RFE/RL: How will the fact that the United States is going from an oil importer to a net oil exporter change its foreign policy calculations? Will it alleviate some fears over instability in the Persian Gulf because of Iran?
Yergin: Ever since the 1970s, obviously the Persian Gulf and the stability of oil supplies from that region has been a primary consideration really, for the global economy. It’s not that the U.S. gets much oil as it is, today, from the Persian Gulf: only about 8 percent of U.S. supply in the last several years has actually come from the Persian Gulf. But [the concern is] rather [because of] the role of those supplies in the overall stability of the global economy.
So I think we will see — with what’s happening with tight oil, as it’s called in the United States, the surge of production, what’s happening with the growth of oil sands in Canada, and the development of oil off of Brazil — we’ll see a western hemisphere that will become largely self-sufficient. Not completely, because oil will still flow in, but it means a change in the position of the western hemisphere and the United States.
Another big impact, which was not anticipated, but which [U.S.] President [Barack] Obama had talked about in his 2012 State of the Union address, is that this has turned out to be a major boost to the U.S. economy, what’s happening with oil [and] natural gas.
In our own work [at IHS], we calculate that something like 1.7 million jobs in the United States are supported by this revolution in unconventional oil and natural gas. Last year, $62 billion of government revenues [were generated] from this. So this has been a very significant contribution to the U.S. economy during a downturn when, generally, conditions were kind of bleak.
RFE/RL: What’s your opinion of shale, and in particular, hydraulic fracking — which one European nation, France, has banned and others are considering banning?
Yergin: In the U.S., shale gas has gone from a decade ago being 2 percent of our natural gas supply to today being 40 percent. I was on the commission that President Obama set up to review the environmental aspects of shale gas. And the conclusion of our commission — which included a number of distinguished scientists — is that there are a series of environmental issues that need to be managed in this sensitive industrial process and it needs to be managed properly and regulated properly — it’s mainly regulated by the states now. But [we found] that it is manageable. If it wasn’t it wouldn’t be 40 percent of our natural gas supply today.
[There is a] different position in Europe, where the circumstances are different. The British government has been quite favorable towards development of shale gas, but it’s only very preliminary drilling, exploration to determine what’s there.
The European energy commissioner has said [very recently] that Europe ought to think about developing shale gas. France has said no to it, Germany is — largely from a policy point of view – not very supportive. Poland and Ukraine see this as very important for economic [reasons] and energy security, but again, it’s moving slowly.
So I think the answer is that there are differences among the states. There’s certainly strong environmental opposition, particularly in France, but it’s going to develop more slowly in Europe.
I think the thing that’s different now is that in the last several months, the private sector — industrial sector — in Europe has become very concerned about losing economic competitiveness against North America because of the more inexpensive energy in North America. Even the Chinese are somewhat concerned about that.
As Europeans worry about economic growth, about being in recession, about very high unemployment rates, some may start to connect that to [the idea] that maybe they should try and accelerate this development and get some of the benefits that the United States is seeing today.
The U.S. Department of Energy has just given permission to a second facility to export liquefied natural gas to Japan and other countries, and that’s a recognition, as well, that our supplies are much more abundant than we imagined a few years ago.
And this is a lower carbon energy resource that many people want to use. The Japanese are using it to make up for their nuclear power plants that have been shut down and China, because of its terrible, terrible air pollution, wants to replace coal with natural gas, and the U.S. will be one of the suppliers, and five years ago that would have seemed impossible to imagine.
22 Comments on "Daniel Yergin On Promise, Perils Of U.S. Oil Boom"
TIKIMAN on Tue, 4th Jun 2013 1:04 pm
This “boom” wont do shit. Gas is still at $4 a gallon due to a shitty dollar and other countries dumping it for their own currencies. The price of oil will never be low ever again.
The bigger the boom the bigger the crash.
westexas on Tue, 4th Jun 2013 1:14 pm
“RFE/RL: How will the fact that the United States is going from an oil importer to a net oil exporter change its foreign policy calculations?”
Well, I guess that settles it. It’s when, not if, that the US joins OPEC.
Of course, the question was directed to Yergin, who, in late 2004, promised that oil prices would soon be down to a permanent index price of $38 per barrel, which caused me to define “One Yergin” as $38 per barrel.
In any case, the US is currently reliant on imports for about half of the crude oil processed in US refineries.
And on the production side, if we assume a (probably conservative) decline rate of about 10%/year from existing oil wells in the US, in order to simply maintain the 2013 annual crude oil production rate for the next 10 years, out to 2023, the oil industry would have to replace the productive of every single oil field in the United States of America–from Thunder Horse in the Gulf of Mexico, to the Eagle Ford Play, to the Permian Basin to the Bakken Play.
westexas on Tue, 4th Jun 2013 1:16 pm
Should read:
. . . the oil industry would have to replace the productive equivalent of every single oil field in the United States of America–from Thunder Horse in the Gulf of Mexico, to the Eagle Ford Play, to the Permian Basin to the Bakken Play.
mike on Tue, 4th Jun 2013 1:36 pm
Daniel yergin, the man who has been consistently wrong time and time again, still getting people to listen to him, classic. You have to give credit to the guy for being that wrong and still being seen as an energy expert. Magic
mike on Tue, 4th Jun 2013 1:43 pm
Also he is talking about kerogen and not oil. Oil production is in decline, the replacement fuel called kerogen is having a slight boom but it is (in comparison to oil) a far less net energy efficient energy source. It’s like throwing wood in a coal powered plant and saying you’ve fixed the energy problem (which of course they are trying to do now with woodchips) We are moving from a highly dense energy source to a less and less dense energy source. The complexity of civilization will unwind (as it has done many many times in the course of humanity) during this century.
westexas on Tue, 4th Jun 2013 1:50 pm
“RFE/RL: How will the fact that the United States is going from an oil importer to a net oil exporter change its foreign policy calculations?”
Well, I guess that settles it. It’s when, not if, that the US joins OPEC.
Of course, the question was directed to Yergin, who, in late 2004, promised that oil prices would soon be down to a permanent index price of $38 per barrel, which caused me to define “One Yergin” as $38 per barrel.
In any case, the US is currently reliant on imports for about half of the crude oil processed in US refineries.
And on the production side, if we assume a (probably conservative) decline rate of about 10%/year from existing oil wells in the US, in order to simply maintain the 2013 annual crude oil production rate for the next 10 years, out to 2023, the oil industry would have to replace the productive equivalent of every single oil field in the United States of America–from Thunder Horse in the Gulf of Mexico, to the Eagle Ford Play, to the Permian Basin to the Bakken Play.
Kenz300 on Tue, 4th Jun 2013 2:03 pm
The Truth Behind High Gas Prices, in 60 Seconds – YouTube
http://www.youtube.com/watch?v=1KTgodTZ5ow
Mike on Tue, 4th Jun 2013 2:14 pm
hahahaha, kenz300 that was hilarious, thanks for the laugh, was that from the onion or something?
Lore on Tue, 4th Jun 2013 2:47 pm
Ole circle jerk Yergin. Trying to make everyone feel good which is why people still listen to him. His faults are like those of a preacher caught with a prostitute.
bor on Tue, 4th Jun 2013 3:02 pm
Mike,
No offence, but you have no idea what kerogen is. US does not produce fuel out kerogen for commercial purposes and never will. Please, before blubbering-blogging do your home work.
Ergin usually knows what he is talking about. He is paid propaganda talking head for oil industry. When oil will disappear all together, he will talk about its abundance. If oil companies will pay for his nonsense.
Actually, he is talking about so-called tight oil, which is mistakenly called in media shale oil. He does not talking about kerogen. Kerogen is, what they say, out fuel of the future and always will be. The tight oil talk will be forgotten in 5-7 years. We have already largely forgotten about hydrogen technology, ethanol nonsense, etc. The same will happen to the tight oil.
Mike. Look into KEROGEN WIKI. Do not be lazy.
dave thompson on Tue, 4th Jun 2013 3:13 pm
http://au.businessinsider.com/author/rob-wile/
westexas on Tue, 4th Jun 2013 4:14 pm
Can someone let me know why my comment has not posted?
Jeffrey Brown
“westexas”
westexas on Tue, 4th Jun 2013 4:15 pm
westexas@aol.com
Plantagenet on Tue, 4th Jun 2013 4:32 pm
Hard to believe Yergin is claiming we have an oil glut and an oil surplus when oil prices are $100 bbl and the US still imports 9 million bbls each day.
Have words completely lost their meaning?
DC on Tue, 4th Jun 2013 4:42 pm
I love how he dodges the question about the search for clean energy-which oil is not.
This is what happens when a turd acquires the power of speech.
Quote/ – this, along with shale gas — the biggest innovation in energy so far in this century, keeping in mind that wind and solar are innovations from the last century.
RoFL! Proof it doesn’t take brains to whore for the oil industry, if he can do it, anyone can.
westexas on Tue, 4th Jun 2013 6:30 pm
Well, I guess that settles it. It’s when, not if, that the US joins OPEC, based on the above Q&A.
Of course, the question was directed to Yergin, who, in late 2004, promised that oil prices would soon be down to a permanent index price of $38 per barrel, which caused me to define “One Yergin” as $38 per barrel.
In any case, the US is currently reliant on imports for about half of the crude oil processed in US refineries.
And on the production side, if we assume a (probably conservative) decline rate of about 10%/year from existing oil wells in the US, in order to simply maintain the 2013 annual crude oil production rate for the next 10 years, out to 2023, the oil industry would have to replace the productive equivalent of every single oil field in the United States of America–from Thunder Horse in the Gulf of Mexico, to the Eagle Ford Play, to the Permian Basin to the Bakken Play.
shortonoil on Tue, 4th Jun 2013 6:37 pm
The largest part of our oil production increase has come from NGLs, which is mostly methane. It takes 3.9 barrels of NGLs to equal 1 barrel of crude on an energy bases. But they count them as the same barrel. Barrel production is increasing, energy – not so good!
This should work out real well if we don’t need transportation, food or anything not supplied by the petroleum industry.
Anyone had their chocolate ration increased recently?
J-Gav on Tue, 4th Jun 2013 8:27 pm
Who gives a flyer about what this industry shill has to say about anything?
Mike on Tue, 4th Jun 2013 8:45 pm
apologies then but I was under the impression Kerogen oil was the synthetic oil extracted from kerogen deposits? if he is talking about something else whilst using the wrong terminology then fine. I haven’t a clue what’s going on in the US with regards to their extraction terms, All I hear is shale oil this and that coming out of the US and presumed they must actually be extracting shale oil. Clearly not, but I guess they do have a long heritage of calling things the wrong fucking thing. Thanks for the info, apologies again.
Satori on Tue, 4th Jun 2013 10:41 pm
I sure hope someone tells the poor Canadians that we soon won’t be needing their tar sand oil in the near future
and I guess that whole Keystone pipeline
thingy is now moot isn’t it ??
James A. Hellams on Tue, 4th Jun 2013 11:54 pm
Regarding the post by shortonoil that states it takes 3.9 barrels of NGLs to equal 1 barrel of oil; I would be very grateful if someone could calculate how many cubic feet of natural gas it takes to make the 3.9 barrels of NGLs.
As I understand the process, natural gas is compressed and refrigerated to many degrees below zero to condense it into a liquid. Correct me if I am wrong.
Natural gas has an energy content of 1,000 BTUs per cubic foot.
BillT on Wed, 5th Jun 2013 3:29 am
Expert = Has-been drip under pressure.