Evidence pointing to U.S. energy independence in the near future is starting to pile up. The U.S. Energy Information Administration is now predicting that net imports of liquid fuels – a category that includes crude oil – will fall to 6 million barrels a day by 2014.
That's a remarkable slide from a peak of 12 million barrels a day between 2004 and 2007, and it would mark the lowest level of imports since 1987. In other words, imports are set to fall to 25-year lows, even though the population of the United States has grown by 30 per cent over this period.
Part of the reason relates to a decline in consumption, which has fallen to 18.7 million barrels a day, a decline of 2 million barrels a day over the past five years.
But rising U.S. energy production – driven by high oil prices and new technologies to unlock resources – is the real head-turning shift that has implications for investors.
The International Energy Agency caused a sensation in November when it issued a report predicting that the United States would overtake Saudi Arabia as the world's largest oil producer by 2017. It suggested the U.S. will become a net oil exporter by 2030, with energy self-sufficiency arriving five years later. The implications for Canada's energy producers – used to shipping its crude south – would be huge.
Though energy self-sufficiency has long been a goal of the United States, the IEA's report was one of the first from a mainstream organization to predict that the goal was attainable. Now, the Energy Information Administration is essentially in agreement.
With production up and demand down, you might think that prices will fall. However, the EIA sees only a modest decline: It predicts that Brent crude will fall to $99 (U.S.) a barrel by 2014, from an average of $112 last year. West Texas Intermediate crude will fall to $91 a barrel from a current price of about $93.
So far, the stock market seems more focused on oil prices than production shifts. Within the S&P 500, energy stocks rose just 2.3 per cent in 2012, well below the 13.4 per cent gain for the overall index. The price of oil fell 7 per cent over this period.
Within the S&P/TSX composite index, energy stocks fell 3.7 per cent in 2012, versus a gain of 4 per cent for the index.