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The U.S. Department of Energy predicted that OPEC will remain in relatively the same position in terms of market share at least through 2035. In terms of the pricing, the DOE's Energy Information Administration said a variety of factors that contribute to a relatively consistent OPEC mean crude oil prices should increase roughly 5 percent per year for the rest of the decade. Meanwhile, the share of renewables increases with U.S. oil production, suggesting a leading economy could retreat from the international market. The recent drastic decline in crude oil prices has sparked a renewed interest in conversations of peak oil. As the 21st century international economy realigns, however, it's not so much a discussion of how much oil is left in the world but where it comes from.
The EIA, in its latest report, states that higher costs for non-OPEC supplies, coupled with a constant market share for OPEC, means oil prices should move along at 5 percent per year for the rest of the decade. But that pace slows down after 2020, when oil prices increase at a rate of 1 percent per year through 2035. Using 2010 dollars, oil prices by 2035 should settle at around $145 per barrel.
In terms of U.S. crude, the EIA said that, despite all the political clamouring, production has reversed the decline that began during the Reagan administration and reached 5.5 million bpd by 2010, up 500,000 compared with 2008. While critics of President Obama's domestic energy policy like to point out that much of that increase is because of Bush-era policies, the EIA states that U.S. crude oil production should continue to move higher in part because of offshore resources in the Gulf of Mexico. Last week, close to 600 bids were submitted for a lease sale in the gulf. Washington said more than $2.6 billion were submitted in total bids.
This all suggests that the U.S. market could pull back from the international arena in terms of oil. Under current regulations, most U.S. crude oil exports are restricted to oil from parts of Alaska and California. The EIA said the U.S. produced around 5.48 million bpd of crude oil last year and that level should increase by 1 million bpd by 2020.
But that doesn't necessarily mean the U.S. market will be isolated from international shocks. Using Newt Gingrich's logic on gasoline prices, most U.S. consumers shouldn’t be paying much more for gasoline in 20 years than they are now, $5 per gallon doomsayers be damned. It's not a matter of peak oil that appears to be a factor here but source. The era of cheap oil is likely over, but it's holding steady, at least according to the EIA's forecast. OPEC by 2035 will still make up about 40 percent of the international market share and, after all, the market is global. Meanwhile, U.S. energy consumption isn't expected to return to the levels seen before the economic collapse of 2008 "because of moderate projected economic growth."
The world isn't running out of oil, nor are their substantially dark economic skies on the horizon. The EIA's model does predict better energy efficiency that correspond with rising energy prices. Satisfying world demand for petroleum products means production from resources from hard-to-reach places. But if the $145 per barrel benchmark is any indication, it should be more of the same for the foreseeable future.
No Dark Clouds on Oil Horizon
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