IEA: USA to become world's biggest oil producer

What does this mean for American renewables?

The IEA has released the World Energy Outlook, its annual overview of the world's energy situation. There are a number of eye-catching findings contained within, including a conclusion that, even with the rapid growth of renewables, fossil fuels with still make up 75 per cent of the global energy mix by 2035.

But the headline finding for many is that the US is poised to become the largest produce of both oil and gas before this decade is out. Earlier I spoke to Dr Fatih Birol, the IEA's Chief Economist, about the findings  (more of our conversation will be published soon as part of the energy series the New Statesman runs with Shell):

When we look to the future we see three major challenges. One is on energy security. The second one is on climate change becoming more and more of a problem. And the third one is that today, 1.3 billion people have no access to electricity in the developing world.

So when I look at the US picture, I see that the US is set to become the largest oil producer of the world around 2017, and the largest gas producer of the world around 2015, overtaking Saudi Arabia and Russia respectively. And as a result of those developments, the geopolitics of energy and the economics of energy will change significantly. In terms of the US, we expected the US oil imports will go down substantially, from the Middle East and elsewhere. But it is not only because of the growth in US oil production, but the US has successfully introduced fuel standards for their cars – finally, I should say, compared to Europe and Japan – in order to reduce their oil demand at home. 

So as a result of those, I would expect that the US in a few years of time will not need any oil from the middle east, or very close to zero. And therefore it will have implications, I think, for US energy policy, but also for foreign and defence policy.

For a number of years, one of the key drivers of research and investment into renewables has been a desire for energy independence. It has been an easy way to sell those new technologies to a public which isn't quite enthused about the importance of preventing climate change.

The discovery of ways to exploit shale gas and "tight, light oil", as well as increasing use of biofuels, has lessened America's motivation to develop low-carbon technologies. It remains to be seen how damaging this could be to the ongoing decarbonisation of the world, but while it is likely to be unambiguous good news geopolitically – lessening the global power of less-than-progressive nations like Saudi Arabia and Russia is a good thing – it could still be a double-edged sword in the long-term.

The IEA's Fatih Birol. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Getty
Show Hide image

Theresa May’s Brexit speech is Angela Merkel’s victory – here’s why

The Germans coined the word “merkeln to describe their Chancellor’s approach to negotiations. 

It is a measure of Britain’s weak position that Theresa May accepts Angela Merkel’s ultimatum even before the Brexit negotiations have formally started

The British Prime Minister blinked first when she presented her plan for Brexit Tuesday morning. After months of repeating the tautological mantra that “Brexit means Brexit”, she finally specified her position when she essentially proposed that Britain should leave the internal market for goods, services and people, which had been so championed by Margaret Thatcher in the 1980s. 

By accepting that the “UK will be outside” and that there can be “no half-way house”, Theresa May has essentially caved in before the negotiations have begun.

At her meeting with May in July last year, the German Chancellor stated her ultimatum that there could be no “Rosinenpickerei” – the German equivalent of cherry picking. Merkel stated that Britain was not free to choose. That is still her position.

Back then, May was still battling for access to the internal market. It is a measure of how much her position has weakened that the Prime Minister has been forced to accept that Britain will have to leave the single market.

For those who have followed Merkel in her eleven years as German Kanzlerin there is sense of déjà vu about all this.  In negotiations over the Greek debt in 2011 and in 2015, as well as in her negotiations with German banks, in the wake of the global clash in 2008, Merkel played a waiting game; she let others reveal their hands first. The Germans even coined the word "merkeln", to describe the Chancellor’s favoured approach to negotiations.

Unlike other politicians, Frau Merkel is known for her careful analysis, behind-the-scene diplomacy and her determination to pursue German interests. All these are evident in the Brexit negotiations even before they have started.

Much has been made of US President-Elect Donald Trump’s offer to do a trade deal with Britain “very quickly” (as well as bad-mouthing Merkel). In the greater scheme of things, such a deal – should it come – will amount to very little. The UK’s exports to the EU were valued at £223.3bn in 2015 – roughly five times as much as our exports to the United States. 

But more importantly, Britain’s main export is services. It constitutes 79 per cent of the economy, according to the Office of National Statistics. Without access to the single market for services, and without free movement of skilled workers, the financial sector will have a strong incentive to move to the European mainland.

This is Germany’s gain. There is a general consensus that many banks are ready to move if Britain quits the single market, and Frankfurt is an obvious destination.

In an election year, this is welcome news for Merkel. That the British Prime Minister voluntarily gives up the access to the internal market is a boon for the German Chancellor and solves several of her problems. 

May’s acceptance that Britain will not be in the single market shows that no country is able to secure a better deal outside the EU. This will deter other countries from following the UK’s example. 

Moreover, securing a deal that will make Frankfurt the financial centre in Europe will give Merkel a political boost, and will take focus away from other issues such as immigration.

Despite the rise of the far-right Alternative für Deutschland party, the largely proportional electoral system in Germany will all but guarantee that the current coalition government continues after the elections to the Bundestag in September.

Before the referendum in June last year, Brexiteers published a poster with the mildly xenophobic message "Halt ze German advance". By essentially caving in to Merkel’s demands before these have been expressly stated, Mrs May will strengthen Germany at Britain’s expense. 

Perhaps, the German word schadenfreude comes to mind?

Matthew Qvortrup is author of the book Angela Merkel: Europe’s Most Influential Leader published by Duckworth, and professor of applied political science at Coventry University.