The return of the U.S. as an energy superpower will not be a short-term event with the economic benefits likely to last "at least two generations", according to the latest research from Citi.
That is one of the key findings in a report from the commodities team at the New York-based bank.
Titled "Energy 2020 Out of America" the 96-page document paints a picture of significant change flowing from increased oil and gas production in the U.S. including a dramatic reduction in the country's current account deficit and a sharp increase in the value of the dollar.
Economy-Wide Change
While increased production of all forms of petroleum, from crude oil to liquefied gas is well understood what the Citi team has done is identify the economy-wide changes which will flow from the higher rates of production.
The most obvious benefit is the elimination of a liquid fuels import bill which had been costing the country $350 billion a year. By 2020, and perhaps earlier, that deficit will have flipped into an $84 billion liquid fuels surplus.
The effect on the current account deficit will be to drive it down from a 3.5% annual deficit to a 0.51% annual deficit by 2020.
Petroleum Reclaims Biggest Export Title
Among the many changes likely to flow from rising U.S. oil and gas production will be the return of petroleum as the country's biggest single export.
"The U.S. has very rapidly become a powerhouse as an exporter of finished petroleum products, natural gas liquids, other oils including ethanol and yes, even crude oil, with gross exports expected to reach a combined 5 million barrels a day or more by the end of this year, up a stunning 4 million barrels a day since 2005," Citi said.
"Mid-year 2014 combined hydrocarbon (all forms of petroleum) exports of 4.5 million barrels a day pushed total oil exports to the top of the list of U.S. exports by category, far surpassing all agricultural products, capital goods and even aircraft as the largest sector of U.S. export trade."
"Unambiguously Positive"
Citi did not speculate on the likely effect of the return of oil and gas as the country's biggest export but did describe it as an unambiguous positive.
"Apart from reduced funding needs, the support for U.S. activity and the competitive improvement in some areas could attract portfolio and direct investment in the U.S. giving the dollar an additional boost," Citi said.
"The expected current account improvement versus a baseline 2.4% of gross domestic product current account deficit is the equivalent of almost $1 billion per business day coming to the U.S., and that is material even in a deep foreign exchange market."
"Momentous, Disruptive and Dislocational"
Citi does not pull its punches in calling the rise of U.S. oil and gas production, and exports, as a globally significant event.
"The transformation of the U.S. from being the largest importer of hydrocarbons in the world to a net surplus country and the largest exporter of liquefied natural gas and liquefied petroleum gas and refined products is momentous, disruptive and dislocational."
The bank argues that the changes underway are permanent and should easily last at least two generations.
"This means all energy-intensive industries that use natural gas or natural gas liquids as feed-stock have earned an embedded comparative advantage in global markets."
