The US will surpass Saudi Arabia and Russia as the world’s top oil producer by 2015, according to a report published by the International Energy Agency (IEA) on Tuesday — with significant implications for industry and manufacturing in the coming years.
Gulf producers have scaled back investment in anticipation of a US shale oil boom and oil glut.
The shift in global energy production will put UK industry at a serious competitive disadvantage as a result of the low price of energy in rival nations, chiefly the US, the IEA says. As much as 10 percent of Europe’s market for energy-intensive industrial products, including iron and steel, glass and chemicals, could go to competitors within the next decade, it said. The finding could have profound consequences for jobs, the economic recovery and climate change policies.
The IEA — regarded as the gold standard for energy data — said that Europe, Japan and other nations were being outpaced by the US because of the low price of energy in the US resulting from the shale gas boom there.
In its annual World Energy Outlook, the organization said that the price differential was likely to endure for decades.
“Today, there is a substantial gap between the US and Europe in gas and electricity prices,” said Fatih Birol, chief economist at the IEA and one of the world’s foremost analysts of energy. “This is a serious problem for Europe. It’s even more serious because this differential in prices will remain for at least the next 20 years.”
He predicted that energy-intensive industries in the UK and Europe would suffer a 10 percent decline in their international market share.
“This will have huge costs in terms of employment, as there will be significant losses. There will be a knock-on effect on the whole economy,” he said.
Energy prices around the world have been transformed by the US push to exploit fracking for shale gas, the controversial form of gas extracted by blasting high-pressure water and chemicals at dense shale rocks.
Only four years ago, according to the IEA, Europe’s gas prices were about the same as those in the US. Now, they are three times higher. In Japan, prices are about five times higher.