The domestic oil industry’s level of awareness regarding the US oil revolution continues to rise. It is expected for US tight oil (existing in the shale layer) to create an even bigger impact on the domestic and global energy industries than shale gas.
According to a related industry source on August 16, the US will become the world’s leading oil-producing country with tight oil by 2020, and its side-effects will greatly influence the domestic energy industry.
Samsung Economic Research Institute (SERI) analyzed that after 2020, the number one oil-producing area will shift from the Middle East to the US. Tight oil, with the second largest reserve, is the cause.
In fact, the US has recently been developing and drilling tight oil instead of cheap shale gas. Therefore, the daily production amount will increase from 2 million barrels in 2012 to 111 million barrels in 2020.
US petroleum based on tight oil will shake the energy industry by lowering and stabilizing oil prices. According to the US Energy Information Administration (EIA), oil prices will drop about 10% to US$116 per barrel by 2020. In addition, the Middle East will hand over oil supremacy to the US, creating a formidable impact.
The US oil revolution will cause a lot of changes to the domestic energy industry as well. An oil industry associate said, “The stabilization of oil prices will be one of the biggest changes expected,” and added, “There will be some considerable fluctuations industry by industry.”
For steel, mechanical, and engineering industries, the change will be positive. With the world concentrating on tight oil development and production, experts expect increased demand for secondary plant construction.
On the other hand, the renewable energy, oil refining, and petrochemistry industries will see weakened competition. Things are looking down especially for the solar and other renewable energy industries, with a decrease in development demand due to the stabilization of oil prices.
The oil industry will lose quite a lot as well. Lower oil prices link directly with lower profits. If the oil price drops by US$10 per barrel, the oil company refining margin drops by US$1.2 per barrel.
The domestic petrochemistry industry will be impacted negatively by the rise of the US oil and chemistry companies based on tight oil. It will become difficult, financially and otherwise, for domestic companies to compete against American oil and chemical companies.
Therefore, the domestic energy industry is analyzing the possible impacts caused by the US oil revolution and coming up with solutions. SERI chief researcher Cho Yong-kwon said, “The US oil revolution will be both meat and poison to the domestic industry,” and added, “The energy regeneration, oil refining, and petrochemistry industries need to pay attention to coming up with good business solution.”