Less than a decade ago, the global energy forecast seemed bleak. Global demand quickly outpaced new sources of supply, driving oil’s march toward an unprecedented high of $145 per barrel. Rising prices put downward pressure on global economic growth, and many countries, including the U.S., were largely dependent on foreign supplies. In 2006, the U.S. — the world’s largest consumer — imported 56% of its total oil consumption. Fear of geopolitical events impacting access to energy increased, along with concerns that inevitable conflicts over control of dwindling energy resources would put additional upward pressure on oil prices.
Today, the energy landscape is dramatically different, giving rise to what Goldman Sachs Global Investment Research (GIR) calls “The New Oil Order.” This emerging paradigm reflects three major trends:
First, in North America, a decade of investment in shale technologies has resulted in soaring oil and gas production. Second, clean energy sources — particularly solar — are reaching critical mass. And third, improvements in energy efficiency are having an increasing impact on the way we live. With these in mind, we see more opportunities to create a cleaner and more efficient energy footprint that is good for both the environment and the economy over the long term.
According to GIR, the investment in shale has had a particularly profound impact on prices and supply. In a few short years, the U.S. has become the largest producer of natural gas in the world and, more recently, one of the largest producers of crude oil. By 2014, oil production reached 12 million barrels per day, nearly a 70% jump over 2008, surpassing that of every OPEC country, including Saudi Arabia. Such increases in U.S. production have put downward pressure on global energy markets, and lower costs have boosted the economies of importing countries.
While many other regions have substantial — and in some cases larger — shale reserves, North America benefits from having all the pieces in place to leverage its reserves. These include innovative companies equipped with a skilled workforce, readily available investment capital, and more developed policy and infrastructure to help catalyze activity. Fully capitalizing on the shale revolution, however, will require long-term, demand-side investments, cleaner, more efficient extraction technologies, new refining capabilities and pipelines to transport fuel to markets where it can be distributed and consumed.