The shale gas revolution is even bigger than we thought. Here's why

US crude oil production will climb to near historic highs by 2016, according to the Energy Information Agency (EIA).

This surge in production is being driven by America's shale revolution. The exploitation of shale oil will increase production by 800,000 barrels per day (bpd) until 2016 when production is expected to hit 9.5m bpd. This is just shy of the US record of 9.6m bpd recorded in 1970.

The figures published in the EIA Annual Energy Outlook 2014 saw it raise its forecast by 2m bpd from last year. While production is expected to slow mildly after 2016 it will still be going strong at 9m bpd by the year 2025 - 1m more barrels per day than currently produced.

The boom in shale oil is set to continue for decades to come. The US will be pumping 7.5m bpd in 2040 significantly more than last year's forecast of 6.1m bpd. The surge in output is set to produce lower prices with oil expected to drop to $92 per barrel in 2017.

It is not just shale oil that is powering a US energy renaissance, but shale gas too. The production of natural gas is set to skyrocket by 56 per cent between 2012 and 2040. The EIA hiked its forecast for shale gas from 28.7 trillion cubic feet (tcf) to 31.9 tcf by 2025.

EIA administrator Adam Sieminski commenting on the report said:

Technologies for crude oil and natural gas production are continuing to increase domestic supply and reshape the US energy market as well as expand the potential for US natural gas exports.

Growing domestic hydrocarbon production is also reducing our net dependence on imported oil and benefiting the US economy as natural-gas-intensive industries boost their output.

Unlike many European countries, America has embraced fracking for shale gas as a route to energy independence and lower prices. This is set to have a dramatic impact on the makeup of America's energy mix. The government agency forecasts that natural gas will overtake coal to provide the largest share of the US electric power generation by 2040. Natural gas will account for 35 per cent of total electricity generation in the US by 2040, while coal will account for 32 per cent.

The EIA's forecasts of cheaper energy and vast reserves of fossil fuels may not be all bad news for the environment. The agency forecasts that total US energy-related CO2 emissions will remain below levels seen in 2005 (6bn metric tons) right through to 2040, when they will reach 5.6bn metric tons. CO2 emissions per 2005 dollar of GDP will sharply decline by 56 per cent. This is due to lower carbon fuels accounting for a greater share of of total energy use.