A buyer's market in oil is in the making and will bring about disruptive market change that should benefit American manufacturers and consumers and prove challenging for Middle Eastern producers and European refiners.
That is the International Energy Agency's new forecast, released Tuesday in London, and the anticipated supply boom from North American oil fields in particular should contribute to what the IEA terms a "supply shock."
America's shale revolution, and abundant capacity in Canada's tar sands, is well established, but "supply growth is even steeper than previously expected," said IEA Executive Director Maria van der Hoeven at an oil summit in London launching the organization's Medium-Term Oil Market Report (MTOMR).
Van der Hoeven noted the irony that the country that was the cradle of the oil industry 150 years go, but which eventually fell into what seemed like irreversible decline, has now become the center of an oil boom.
But today's oil bonanza in the U.S., she said, has powerful compound effects as well.
"What makes the tight oil boom truly transformative is not just the sheer production volumes unlocked but the combination of volumetric production growth with other factors: the crude's distinctively light quality, the unconventional nature of both the plays from which it is extracted and the technologies which have unlocked it, the economic and market impact of the new production, and the chain reaction it is creating in the global transportation, storage and refining infrastructure," a summary of the report says.
While U.S. law continues to ban crude oil exports, the growth in oil supply should be a boon to U.S. refiners in the coming years. Long a top importer of refined products, the U.S. is already a large net exporter, and steep production surpluses are expected to push the U.S. share of refined products up even more.
As a news release announcing the report put it, "The supply shock created by a surge in North American oil production will be as transformative to the market over the next five years as was the rise of Chinese demand over the last 15."
The report's scenario was not entirely rosy for the U.S., citing three categories of challenge: infrastructural and logistical, legislative and regulatory, and environmental.
