Saudi Oil Minister Ali al-Naimi said he viewed the increase in U.S. oil production as a new source of supply that will help stabilize oil markets. Oil from shale is providing a buffer against an unsteady Middle East market, but it's not too early to consider what happens to markets after the revolution.
Naimi said during a meeting in Riyadh with U.S. Energy Secretary Ernest Moniz the increase in U.S. oil production was adding a level of stability to an international oil market unsettled by problems in the Middle East and North Africa.
"It is necessary to continue consultations between our two countries to expand the horizons of cooperation, including joint investments, and working with oil producing and consuming countries for the stability of the global market," a statement from the official Saudi Press Agency said. (Related article: The Fracking Revolution: Promise and Perils)
The U.S. Energy Information Administration said in its short-term market report that production from countries outside the Organization of Petroleum Exporting Countries is expected to increase by a record 1.9 million barrels per day this year. Most of that increase is expected from North America. By next year, U.S. oil production should break a 43-year-old record with 9.3 million bpd.
With a leading consumer producing more of its own oil, Saudi Arabian Oil Co. has the breathing room it needs for Februarymaintenance at its 750,000 bpd Shaybah oil field. Oil production from Saudi Arabia, OPEC's leading supplier, declined 3.5 percent from the third quarter of 2013 to settle at 9.6 million bpd during the fourth quarter, leaving plenty of room for U.S. production growth.
U.S. oil production gained traction just as Libya's position in the marketplace fell because of civil war. Nearly three years ago, the International Energy Agency called on member states to release oil from their strategic reserves to offset declines from Libya. With Libya still struggling to return to pre-civil war oil production levels, the conversation is different because of oil from North America.
Without erasing U.S. legislation enacted in the wake of the 1970s Arab oil embargo, crude oil produced in the United States should stay within the domestic economy. By 2035, the United States should be self-reliant in terms of energy, according to BP's annual economic outlook. But that year may mark the zenith of a brief revolution. (Related article: Lukoil Deal Makes Bulgaria Largest Eastern Europe Refiner)
BP said in its report the United States should overtake Saudi Arabia this year in terms of oil production. By Riyadh's own account, that comes as something of a relief as it addresses changes to its own market dynamics brought on by an increase in regional energy demand. For OPEC as a whole, its share in the oil market declines for much of the decade but recovers by 2020 as U.S. oil production slows down. BP's report suggests U.S. oil production, meanwhile, falls by 75 percent through 2035.
Decline in U.S. shale production, and the inability of other countries to replicate the success, is not so much validation of peak oil theory as much as it is a return to the status quo, where Middle East and North African producers dominate the market. BP's report, meanwhile, said oil shows the slowest growth in long-term market forecasts compared with natural gas. With renewables also gaining strength, a future energy market may count oil as a second-tier fuel source. The shale revolution in the United States, as with any revolution, will be brief. It's what happens after the revolution ends that matters.