US President Barack Obama speaks at an oil and gas production fields on federal lands March 21, 2012 near Maljamar, NM
PHOTO: AFP/Getty Images
US President Barack Obama speaks at an oil and gas production fields on federal lands March 21, 2012 near Maljamar, NM

Story highlights

U.S. oil imports will fall to their lowest level in 25 years next year according to forecast

Figures reflect growth of U.S. production made possible by new techniques like "fracking"

EIA expects U.S. production to lower price of Brent crude from 2012's $112 to $99 in 2014

(Financial Times) —  

US oil imports will fall to their lowest level for more than 25 years next year, as production booms while demand grows only slowly, according to a government forecast.

The US Energy Information Administration predicted that net imports of liquid fuels, including crude oil and petroleum products, would fall to about 6m barrels per day in 2014, their lowest level since 1987 and only about half their peak levels of more than 12m during 2004-07.

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The figures reflect the spectacular growth of US production thanks to the unlocking of “tight oil” reserves using hydraulic fracturing and horizontal drilling in states led by North Dakota and Texas.

Jack Gerard, head of the American Petroleum Institute, the industry lobby group, said the US was at “a great turning point in our nation’s history”, that would “realign the energy axis toward the west and into our own control”.

The declining US dependence on imports will still bring benefits, including increased resilience to crude price shocks and job creation in the oil industry.

The EIA also said it expected increased US production to put downward pressure on oil prices. It forecast that internationally traded Brent crude would drop from an average of $112 per barrel last year to $99 in 2014, while US West Texas Intermediate dropped from $94 to $91.

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US crude production hit a low point of 5m b/d in 2008, but rebounded to 6.43m last year and is expected by the EIA to rise to almost 8m in 2014.

At the same time, consumption has been falling, from 20.7m b/d, for all liquid fuels, in 2007, to 18.7m last year. The EIA expects it to rise very slightly over the next couple of years, but expects that the US will still use less oil in 2014 than in 2011.

The surge in production in the US has led some forecasters, including the International Energy Agency, the rich countries’ think-tank, to predict that it will overtake Saudi Arabia and Russia to become the world’s largest oil producer by the end of the decade.

The EIA has been cautious about those forecasts, saying they depend on definitions of the types of oil being compared, and factors that are difficult to predict including Saudi production decisions.

Even if the US does not become the world’s largest oil producer, or manage to cut net imports to zero, as some forecasters expect, it will still be less reliant on imports than in the past decade.

Michael Levi, of the Council on Foreign Relations, a think-tank, said: “It’s good for the domestic economy when we have a driver of growth like this, and it’s good that we have come out of the period where we had a constant increase in oil demand.”

However, he added, the US would still next year be importing about as much oil as at the time of the shocks of 1973-74, which did great damage to the economy.

Analysts and oil executives have warned that even if the US becomes completely self-sufficient in oil, it will not be able to ignore the potential threat to the world economy created by price rises and supply disruptions, and so would still have an interest in sustaining production in the Middle East.

Mr Gerard, who spent much of the past four years hitting out at the Obama administration, warned the government “to do no harm” to the industry and avoid over-regulation, such as federal controls on hydraulic fracturing.

“Don’t overreact and do anything that would impede or discourage what we see going forward state by state today,” he said.