The $4.75 per gallon sign I saw at a gas station on Santa Monica Boulevard two weeks ago still stings, even though the price has since dropped to $3.90. (A steal!) It stings even more knowing that the International Energy Agency said Monday that the U.S. would likely overtake Russia to become the world’s largest oil producer by 2023, the result of crude production predicted to reach 12.1 million barrels per day.
That’s a big deal for the world’s oil markets. The U.S. didn’t export crude by law until late 2015, but the IEA predicts it will export 4.9 million barrels per day by 2023. Canada, Brazil, and Norway—none of which are in OPEC—are also expected to grow oil output.
Sounds like a lot, doesn’t it? And yet global oil demand is expected to surpass 100 million barrels per day next year. (So much for peak oil.) That growth is the product of guys like me joyriding in cities like LA—gasoline is the top petro product in the U.S.—as well as oil-hungry industries like construction, public transportation, and real estate. (What do you think heats all of those buildings?)
The news comes at a tense time for global trade. U.S. president Donald Trump this week reaffirmed his commitment to substantial tariffs on steel and aluminum imports despite widespread protest from members of his own party as well as captains of industry. The U.S. oil and gas industry howled, saying the plan—meant to protect American industry—would actually hurt it by making it prohibitively expensive to build drilling equipment, pipelines, and refineries. All of which, it should be noted, require specialized steel from outside the U.S.
Which brings me back to the IEA. In its report, the agency warned that energy companies need to start spending again to avoid potential crude oil shortages after 2020 that could lead to surging prices. (The slump in oil prices since 2014 killed much of that investment.) That won’t happen if it costs too much to invest in new infrastructure. And then, well, we’ll all really be stung.