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US shale revolution will transform global economy, says BP
BP's looming switch to a net exporter of energy has big implications for the dollar, world trade and US relations with China
America's shale gas revolution is a "force for good" in the global economy, BP said Photo: Sarah Brook
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By Alistair Osborne, and Emily Gosden
8:22PM GMT 15 Jan 2014
9 Comments
America's shale gas revolution will have a radical impact on the global economy, with the consequent cut in the US trade deficit transforming the dynamic with China, BP’s top economist has said.
Unveiling the oil giant’s World Energy Outlook 2035, predicting trends in global energy markets for the next 22 years, Christof Rühl said the looming arrival of the US as an exporter of energy had far-reaching implications for Sino-US relations, the dollar and trade.
BP expects America to switch from “a net importer of energy to a net exporter around 2018”, while Asia will account for about 80pc of import growth to 2035.
American self-sufficiency in energy has prompted economists to speculate that the nation is on the cusp of a new era of industrialisation but Mr Rühl said: “There is another effect that will dwarf the current discussion about industrial relocation – and that’s the balance of payments effect. Last time I looked, more than 50pc of the US deficit in goods and services came from paying for fossil fuel imports. As the US turns into an exporting nation that is going to go away.”
He said that, as yet, there had been “no detailed study” by the International Monetary Fund or similar body “that does the numbers and works out complicated things like the effect on exchange rates” – but suggested US shale should be seen as a positive for the global economy.
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“If you were to ask any economist what would be the potential biggest source of global instability over the past say 10 years, eight out of 10 would have included macro-economic imbalances – the big trade deficit in the US, the big surplus in China. In that respect, all of a sudden a force for good seems to have emerged from a completely unsuspected corner.”
Mr Rühl said Asian countries would also have to look further afield than the Middle East, such as Africa and the former Soviet Union, to satisfy demand for imports, adding: “So there are big changes in the trading system caused by the energy revolution in the US.”
BP chief executive Bob Dudley said the group envisaged 41pc growth in energy demand to 2035 – down from 50pc over the past two decades – nearly all of which was “accounted for by emerging economies, China and India in particular”.
Oil is expected to be the slowest growing of the major fuels to 2035, with demand rising 0.8pc a year – though that equates to an extra 19m barrels a day.
Mr Rühl said that by 2035 the market shares of oil, coal and gas “will have converged to roughly 27pc each – the first time in human history where the world is not dominated by one fuel.”
Mr Dudley said BP’s recent pipeline deal in Azerbaijan, built on unlocking gas from the Caspian Sea, and expansion in Oman highlighted how the group was positioning itself for the growing role of gas in the global energy mix.
BP was sceptical, however, on shale in Europe, saying it would make only a “very marginal” contribution of about 6pc of Europe’s gas demand by 2035.
Mr Rühl said that, thanks to a combination of politics and “massive infrastructure constraints in terms of drilling rigs and transport, we do see it emerging only on a limited scale”.
Mr Dudley also warned that BP’s latest legal setback over the Deepwater Horizon oil spill, with a US appeals court last week rejecting the oil group’s attempt to block what it claims are bogus compensation claims, had wider ramifications.
Noting BP had put aside around $40bn to settle, Mr Dudley said: “A lot of people will be watching and wondering whether settling things makes sense. It’s quite significant what it says about the US legal system and doing business in America.”
BP's looming switch to a net exporter of energy has big implications for the dollar, world trade and US relations with China
America's shale gas revolution is a "force for good" in the global economy, BP said Photo: Sarah BrookFind out if anything is affecting your credit rating. Check your credit score with Experian here.
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By Alistair Osborne, and Emily Gosden
8:22PM GMT 15 Jan 2014
9 Comments America's shale gas revolution will have a radical impact on the global economy, with the consequent cut in the US trade deficit transforming the dynamic with China, BP’s top economist has said.
Unveiling the oil giant’s World Energy Outlook 2035, predicting trends in global energy markets for the next 22 years, Christof Rühl said the looming arrival of the US as an exporter of energy had far-reaching implications for Sino-US relations, the dollar and trade.
BP expects America to switch from “a net importer of energy to a net exporter around 2018”, while Asia will account for about 80pc of import growth to 2035.
American self-sufficiency in energy has prompted economists to speculate that the nation is on the cusp of a new era of industrialisation but Mr Rühl said: “There is another effect that will dwarf the current discussion about industrial relocation – and that’s the balance of payments effect. Last time I looked, more than 50pc of the US deficit in goods and services came from paying for fossil fuel imports. As the US turns into an exporting nation that is going to go away.”
He said that, as yet, there had been “no detailed study” by the International Monetary Fund or similar body “that does the numbers and works out complicated things like the effect on exchange rates” – but suggested US shale should be seen as a positive for the global economy.
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“If you were to ask any economist what would be the potential biggest source of global instability over the past say 10 years, eight out of 10 would have included macro-economic imbalances – the big trade deficit in the US, the big surplus in China. In that respect, all of a sudden a force for good seems to have emerged from a completely unsuspected corner.”
Mr Rühl said Asian countries would also have to look further afield than the Middle East, such as Africa and the former Soviet Union, to satisfy demand for imports, adding: “So there are big changes in the trading system caused by the energy revolution in the US.”
BP chief executive Bob Dudley said the group envisaged 41pc growth in energy demand to 2035 – down from 50pc over the past two decades – nearly all of which was “accounted for by emerging economies, China and India in particular”.
Oil is expected to be the slowest growing of the major fuels to 2035, with demand rising 0.8pc a year – though that equates to an extra 19m barrels a day.
Mr Rühl said that by 2035 the market shares of oil, coal and gas “will have converged to roughly 27pc each – the first time in human history where the world is not dominated by one fuel.”
Mr Dudley said BP’s recent pipeline deal in Azerbaijan, built on unlocking gas from the Caspian Sea, and expansion in Oman highlighted how the group was positioning itself for the growing role of gas in the global energy mix.
BP was sceptical, however, on shale in Europe, saying it would make only a “very marginal” contribution of about 6pc of Europe’s gas demand by 2035.
Mr Rühl said that, thanks to a combination of politics and “massive infrastructure constraints in terms of drilling rigs and transport, we do see it emerging only on a limited scale”.
Mr Dudley also warned that BP’s latest legal setback over the Deepwater Horizon oil spill, with a US appeals court last week rejecting the oil group’s attempt to block what it claims are bogus compensation claims, had wider ramifications.
Noting BP had put aside around $40bn to settle, Mr Dudley said: “A lot of people will be watching and wondering whether settling things makes sense. It’s quite significant what it says about the US legal system and doing business in America.”
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