The road to energy independence has two lanes: produce more and consume less. Thanks to growing output from shale plays and increasing energy efficiency, the United States is driving in both lanes and is estimated to reach energy independence by 2025, according to consultancy Wood Mackenzie.
When the country does reach energy independence, it will be the first time since 1952 that the United States exports more energy than it imports, according to the firm's analysts.
"Over the last seven years, the U.S. has added 3 million b/d of tight oil and 27.5 Bcf/d of shale gas to the global energy mix, a spectacular 42% increase in U.S. oil and gas production. Meanwhile, oil demand is decreasing primarily due to efficiency gains in the transport sector," said Wood Mackenzie's James Brick, senior analyst.
Uncertainties facing the domestic energy market that could shorten the road to energy independence include lifting of the ban on U.S. crude oil exports, increased tight oil production and lower demand in the transportation sector.
Lifting the export ban would raise crude prices and stimulate more production, Wood Mackenzie said. If crude oil exports resulted in U.S. producers receiving an additional US$5 per barrel, production could increase by 350,000-450,000 b/d. In order to produce this additional oil, an investment of around US$5 billion would be needed, the firm said.
"Not all companies would actually benefit from lifting the crude oil export ban," Brick said. "It's likely that upstream producers would generally benefit the most via increased volumes and higher prices. Oilfield service companies and rig manufacturers would also benefit from the additional investment."
Even without a lifting of the ban on exports, higher production of tight oil than is currently expected could be in the cards, Brick said. "Tight oil and shale gas plays are still evolving and there are many opportunities for the application of new production techniques," he said. "Production could be up to 3.0 million b/d higher than our view of 10.3 million b/d by 2030 as a result of the application of technologies such as enhanced oil recovery (EOR) and refracturing. EOR techniques currently being tested are especially promising and early indicators suggest recovery rates could double."
On the demand side, the U.S. vehicle fleet could become more than 40% more efficient by 2030, and efficiency could increase even faster, Wood Mackenzie said. Additionally more drivers could choose cars over less-efficient light trucks and SUVs.
The three key uncertainties that would stall U.S. energy independence include delays in developing critical export facilities, environmental regulations and energy policies that would encourage more natural gas to be used in the power sector. "If local or national regulation that discourages fracking is passed, oil and gas production will be lower," Brick said. "Also, if U.S. energy policy is enacted to reduce carbon dioxide emissions, it is likely gas used by the power sector will increase."