U.S. may soon become world's top oil producer
A worker hangs from an oil derrick outside of Williston, N.D. / AP Photo/Gregory Bull
NEW YORK U.S. oil output is surging so fast that the U.S. could soon overtake Saudi Arabia as the world's biggest producer.
Driven by high prices and new drilling methods, U.S. production of crude and other liquid hydrocarbons is on track to rise 7 percent this year to an average of 10.9 million barrels per day. This will be the fourth straight year of crude increases and the biggest single-year gain since 1951.
The boom has surprised even the experts.
"Five years ago, if I or anyone had predicted today's production growth, people would have thought we were crazy," says Jim Burkhard, head of oil markets research at IHS CERA, an energy consulting firm.
The Energy Department forecasts that U.S. production of crude and other liquid hydrocarbons, which includes biofuels, will average 11.4 million barrels per day next year. That would be a record for the U.S. and just below Saudi Arabia's output of 11.6 million barrels. Citibank forecasts U.S. production could reach 13 million to 15 million barrels per day by 2020, helping to make North America "the new Middle East."
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The last year the U.S. was the world's largest producer was 2002, after the Saudis drastically cut production because of low oil prices in the aftermath of 9/11. Since then, the Saudis and the Russians have been the world leaders.
The United States will still need to import lots of oil in the years ahead. Americans use 18.7 million barrels per day. But thanks to the growth in domestic production and the improving fuel efficiency of the nation's cars and trucks, imports could fall by half by the end of the decade.
The increase in production hasn't translated to cheaper gasoline at the pump, and prices are expected to stay high relatively high for the next few years because of growing demand for oil in developing nations and political instability in the Middle East and North Africa. Still, producing more oil domestically, and importing less, gives the economy a significant boost.
The companies profiting range from independent drillers to large international oil companies such as Royal Dutch Shell, which increasingly see the U.S. as one of the most promising places to drill. ExxonMobil agreed last month to spend $1.6 billion to increase its U.S. oil holdings.
Increased drilling is driving economic growth in states such as North Dakota, Oklahoma, Wyoming, Montana and Texas, all of which have unemployment rates far below the national average of 7.8 percent. North Dakota is at 3 percent; Oklahoma, 5.2.
Businesses that serve the oil industry, such as steel companies that supply drilling pipe and railroads that transport oil, aren't the only ones benefiting. Homebuilders, auto dealers and retailers in energy-producing states are also getting a lift.
IHS says the oil and gas drilling boom, which already supports 1.7 million jobs, will lead to the creation of 1.3 million jobs across the U.S. economy by the end of the decade.
"It's the most important change to the economy since the advent of personal computers pushed up productivity in the 1990s," says economist Philip Verleger, a visiting fellow at the Peterson Institute of International Economics.
The major factor driving domestic production higher is a newfound ability to squeeze oil out of rock once thought too difficult and expensive to tap. Drillers have learned to drill horizontally into long, thin seams of shale and other rock that holds oil, instead of searching for rare underground pools of hydrocarbons that have accumulated over millions of years.
To free the oil and gas from the rock, drillers crack it open by pumping water, sand and chemicals into the ground at high pressure, a process is known as hydraulic fracturing, or "fracking."
While expanded use of the method has unlocked enormous reserves of oil and gas, it has also raised concerns that contaminated water produced in the process could leak into drinking water.
The surge in oil production has other roots, as well:
- A long period of high oil prices has given drillers the cash and the motivation to spend the large sums required to develop new techniques and search new places for oil. Over the past decade, oil has averaged $69 a barrel. During the previous decade, it averaged $21.
- Production in the Gulf of Mexico, which slowed after BP's 2010 well disaster and oil spill, has begun to climb again. Huge recent finds there are expected to help growth continue.
- A natural gas glut forced drillers to dramatically slow natural gas exploration beginning about a year ago. Drillers suddenly had plenty of equipment and workers to shift to oil.
The most prolific of the new shale formations are in North Dakota and Texas. Activity is also rising in Oklahoma, Colorado, Ohio and other states.
Production from shale formations is expected to grow from 1.6 million barrels per day this year to 4.2 million barrels per day by 2020, according to Wood Mackenzie, an energy consulting firm. That means these new formations will yield more oil by 2020 than major oil suppliers such as Iran and Canada produce today.
U.S. oil and liquids production reached a peak of 11.2 million barrels per day in 1985, when Alaskan fields were producing enormous amounts of crude, then began a long decline. From 1986 through 2008, crude production fell every year but one, dropping by 44 percent over that period. The United States imported nearly 60 percent of the oil it burned in 2006.
By the end of this year, U.S. crude output will be at its highest level since 1998 and oil imports will be lower than at any time since 1992, at 41 percent of consumption.
"It's a stunning turnaround," Burkhard says.
Whether the U.S. supplants Saudi Arabia as the world's biggest producer will depend on the price of oil and Saudi production in the years ahead. Saudi Arabia sits on the world's largest reserves of oil, and it raises and lowers production to try to keep oil prices steady. Saudi output is expected to remain about flat between now and 2017, according to the International Energy Agency.
But Saudi oil is cheap to tap, while the methods needed to tap U.S. oil are very expensive. If the price of oil falls below $75 per barrel, drillers in the U.S. will almost certainly begin to cut back.
The International Energy Agency forecasts that global oil prices, which have averaged $107 per barrel this year, will slip to an average of $89 over the next five years -- not a big enough drop to lead companies to cut back on exploration deeply.
Nor are they expected to fall enough to bring back the days of cheap gasoline. Still, more of the money that Americans spend at filling stations will flow to domestic drillers, which are then more likely to buy equipment here and hire more U.S. workers.
"Drivers will have to pay high prices, sure, but at least they'll have a job," Verleger says.
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TAYLORSUCRAM said, "I believe they call it CAPITALISM and the FREE MARKET. I also believe that the FREE MARKET, isn't free. Someone always PAYS! That someone is YOU! How's that working out for ya?
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Blind faith is his so-called "free market" led Texas Senator Phil Gramm (remember him?) to lead the GOP charge in 1999 and 2000 to DEregulate Wall Street. At the time, many skeptics warned Gramm that neutering the SEC was not the brightest idea.
By 2008, even GOP candidate John McCain labeled the result a "casino", and danger to investors. When the GOP showcase experiment crashed and burned in a public spectacle, cratering our economy, the GOP retired from the field in disgrace-- a party entirely bankrupt of ideas.
Today, the GOP is still bankrupt of ideas, not to mention a basically factual set of propositions about any subject. From the Romney / Ryan "budget", to economic growth, to a foreign policy that regards Syria as Iran's outlet to the sea, the GOP must rely on emotional pitches to its Archie Bunkered base-- hatred and suspicion about anything 21st century.
Oil companies were busy in the 1990's actually shutting down refineries, and dropping capacity.
What logical purpose was served, if not to provide an easily controlled point from which to manipulate oil and gas prices?
one4gipper, quoting DOE secretary Steven Chu-- " ' Somehow, we have to figure out how to boost the price of gasoline to the levels in Europe.' This single sentence best sums up Obama's energy policies."
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Actually, it does not. But thank you for inadvertently pointing out that oil pricing is a policy/political issue, as much as an economic one-- as presidents of both parties, from Nixon and Reagan to Carter and Obama have recognized. Indeed, Energy Secretary Chu gives President Obama great credit for farsighted policy on our energy future.
1. Secretary Chu recognizes more oil can be extracted, but at continuously greater cost through the years. Increasing cost reflects mounting difficulty of reaching the oil, which brings up the widely-discussed "peak oil" of proven reserves, after which progressively less oil will be pumped, for progressively more money. This is not an energy policy on which this nation can base its future, but a blind alley.
2. Long-term oil and gas production "surges", in greater part, because of fracking, a toxic chemical-laden process which threatens our fresh water supplies, including the Ogallala Aquifer in the northern plains states. Fracking-- made quasi-legal by VP Dick Cheney when he gutted parts of the clean air and water acts at his secret "energy conference" shortly before 911-- pumps millions of gallons of poisoned water underground. The EPA already has confirmed leakage of fracking chemicals into a local water supply, and hundreds of other reports suggest the effect is widespread, with disastrous implications for the future of our water supplies.
3. Despite what the oil and coal industry would tell us, oil and coal is not a permanent solution to our appetite for energy. American oil may flow freely now, but it is still not enough to make us energy independent.
That same energy independence has been the focus of US policymakers ever since Pres. Carter announced energy independence is the "moral equivalent of war". More likely than ever, true energy independence will come from a combination of renewable energy sources, fed into a national "smart" power grid-- and not an ever more elusive supply of oil.
If gas is $8.00/gal in Europe and Obama does everything half-a$$ed, of course it is only $4/gal here. But, it is not for lack of trying.
Wall Street's share might be even more, and certainly not for lack of trying.
That was after he said - once again, unbelievably - that Syria is Iran's outlet to the sea.
But at least Romney had been warned by his debate coaches to say nothing about seeing Russia from his window.
Now, if only Ryan could get over his perceptual problem with bayonets (and horses).
On March 1,2011, the Dems in the House proposed a bill to STOP $15 Billion Dollars in tax payer subsidies to INTERNATIONAL Oil companies. The GOP members voted UNANIMOUSLY to keep this welfare to billionaires flowing. This is the blatant manipulation of so called free market forces that the Republicans swear by!
INTERNATIONAL OIL COMPANIES DON'T NEED AMERICAN TAX BREAKS !!!
Understand this, oil was around $125 a barrel on July 24, 2008 and gas was around $3.69. Now the price of a barrel of oil has dropped to $100 and the price of gas is $4.30 and climbing. This is not supply and demand, this is manipulation of the Oil Futures Market by the very same people on Wall Street that brought about our financial crisis. YOU MAY THANK THE REPUBLICANS FOR THIS AND THE FACT THAT YOU VOTED THEM BACK INTO POWER AT THE MID-TERM ELECTIONS .... OF COURSE THE FACT THAT THE AVERAGE IQ IN AMERICA IS 98, NOT 120 DIDN'T HURT EITHER.
As of December 2011, the number one EXPORT of the United States was, not Weapons or Machines of War. No, our number one export was FUEL. That's right, America's number one export is Gasoline, Fuel Oil, etc. When China and Europe will pay $10-to-12 Dollars for a Gallon of Gas it makes sense to "Ship and Sell it Overseas".
The KEYSTONE PIPELINE was merely an attempt to help Canada refine their "shale oil" in the Gulf and then sell their oil products overseas! NONE OF IT WAS GOING TO BE SOLD IN AMERICA!!!
I believe they call it CAPITALISM and the FREE MARKET.
I also believe that the FREE MARKET, isn't free.
Someone always PAYS! That someone is YOU!
How's that working out for ya?
"Capitalism is the extraordinary belief that the nastiest of men, for the nastiest of reasons, will somehow work for the benefit of us all." - John Maynard Keynes