Can You Guess Where the Latest Oil Boom is Occurring?

March 4, 2013 | Filed under: New Energy News | Posted by: admin

The U.S. is an oil-producing powerhouse.

Take a second to think about a few oil-rich countries. Which ones come to mind? Most likely you are imaging places like Saudi Arabia, Russia, and Iran, but a new oil powerhouse is beginning to materialize. With the recent boom in natural gas drilling and the uneasiness to finalize a decision on the Keystone XL pipeline, many may be surprised to hear that the United States is producing oil at its highest level in 20 years. According to the U.S. Energy Information Administration (EIA), the U.S. is producing over 7 million barrels of oil each day, a jump from 6.4 million just one year ago. An increase in oil production was expected, but an increase of this size in such a small amount of time is actually quite astonishing.

What’s even more surprising is that the International Energy Agency is predicting that the U.S. could become the world’s largest oil producing nation by 2020, surpassing both Saudi Arabia and Russia. To aid this prediction, U.S. demand for oil is at a 17-year low, causing oil imports to decline by approximately 1.2 million barrels per day when compared to this time last year.

In fact, China has recently become the world’s largest net oil importer, a title which the U.S. held since the mid 1970s. Net oil imports are typically classified as both crude and refined oil products. The EIA has found that U.S. net oil imports fell to 5.98m barrels per day in December, its lowest level since February 1992. At the same time, Chinese net oil imports rose to 6.12m barrels per day. Citigroup’s Commodities Analyst Eric Lee was the first to report on this trend declaring, “China looks to have overtaken the U.S. to become the world’s largest net importer of crude and petroleum products.”

With oil gushing from the Bakken formation in North Dakota, and Texas doubling its crude production since January 2010, these two states continue to lead the U.S. in oil production. As mentioned by Mark Perry, economics professor at the University of Michigan-Flint, the state of Texas has produced nearly one third of U.S. oil during the past six months.

There is no doubt that hydraulic fracturing has helped with this new level of production. The process of pumping millions of gallons of water, sand, and chemicals into the ground to break apart the rock in order to extract oil and gas, is controversial to say the least, but certainly effective in collecting this resource.

“When horizontal drilling got married to hydraulic fracturing, the key year was 2003. That was when it was proof of concept. So for five years, it unfolded quietly with the independents. In 2008, that’s when the majors got interested,” stated Daniel Yergin, vice chairman of IHS, Inc. Since then, it’s clear to see ‘the majors’ have remained not only interested, but fully dedicated to consistent fracking.

As with any large venture, a number of variables will have an impact on the future of U.S. oil production. Oil prices, the amount profits being made in each area, and how long a well continues to produce oil are all determining factors. Protestors of hydraulic fracturing also hold concerns on groundwater pollution, while many politicians say there is nothing to worry about.

One major question being asked is how will this increase in domestic oil production affect gasoline prices? Since oil prices are determined on the world market, increased U.S. drilling will not automatically lower the price of a barrel of crude. “It will be an interesting interaction between increasing supply in the U.S. and increasing global demand. We’ll see how that all plays out over the next couple of years in terms of oil prices,” says Perry.

Sarah Battaglia
Energy Curtailment Specialists, Inc.

Sarah can be found on LinkedIn and Google+.

5 Responses to Can You Guess Where the Latest Oil Boom is Occurring?

Go America Go!
Soon America will have Energy Security and Energy Independence.
Gets get America using it’s energy efficiently so that energy costs stay down.
Lets bring home overseas manufacturing, because we have reasonably priced energy ~ more can be paid in wages, and we will still be competitive.
Our energy used efficiently will keep our environment improving.
This energy will create so many jobs.

America is blessed, if we use it wisely.

Sid Abma
March 7, 2013 at 1:17 am
Sid- I appreciate your enthusiasm! I agree, we will be better off once Americans start using their energy more efficiently. Between natural gas and renewable energy, I think we are headed in the right direction.

Thanks for commenting!

Sarah Battaglia
March 7, 2013 at 8:33 am
It’s certainly encouraging to read that the US now produces more oil domestically than what we import, but only barely. We have a long way to go to gain energy independence. To think that we could become the worlds leading oil producer by 2020 is indeed astounding!

I’ve not studied the issue of hydraulic fracturing enough to have an informed opinion, but do have grave concerns over the safety of our drinking water supply. I believe in the not-too-distant future that major global concerns and conflicts will be over safe, clean drinking water — not oil!

Cliff Muller
March 7, 2013 at 10:33 am
Pingback: Gas Prices Rise Despite Epic Oil Boom | Energy Blog – Current Energy News, Stories, & Events | Your Energy Blog
Nice article, Sarah, but I do not believe the US was the largest importer of oil until 1987, and not in the ’70′s as you mentioned. Also, I am in no way surprised that we are once again moving toward sufficiency, much less surplus in oil production. Texans taught the world how to drill.

So you know, our US oil industry, two million employees strong, collapsed in 1986. “Back in the day,” US independent oil companies drilled and completed approximately 97% of all wells drilled. Most of us believe that the major oil companies drilled all the wells; completely untrue. But, the majors controlled all the refineries, so they purchased oil for their refineries from our independent drillers at the “posted” price (up to $40 a barrel in 1982).

By 1984, major US oil companies had ceased drilling here and were virtually drilling in other foreign countries. They built so much foreign production, so quickly, that they began shipping it all home to their own US refineries. Now, vertically integrated, they dropped the price of oil to almost nothing, killing our US independent drillers and the entire industry. Why? They didn’t care what the posted price of oil was, as they were filling their own refineries. You and I don’t buy oil, just gasoline, so the majors kept gasoline prices reasonable at the pumps, not at all caring what the posted price of oil was.

Lease royalties the majors paid to foreign governments was based on a percentage, so they dropped the price of oil down to $8 to $12, thereby owing those foreign governments almost nothing for taking their oil. With prices down to less than oil costs to produce (the majors paying only posted price to our independent US oil drillers), within a few short months, all US wells began shutting down. The electric bill (to pump the wells) was higher than the oil purchased. Those 2 million who built us into the largest exporter of oil in the world, were now out of work.

Yes, the US was the largest “exporter” of oil in the world until 1986. By 1987 the US was the largest importer in the world, as the majors flooded their refineries with cheap foreign oil. An energy policy, which could easily have been put in place, was somehow ignored by our leaders. Reagan was President at the time, but more interestingly, Vice President, George H. W. Bush, an oil man, stood idly by. Years later, his son, President George W. Bush made the statement, “we need a national oil policy.” Too little, too late.

I am glad that we are seeing a resurgence of oil. Prices at the pump are completely controlled, though, and if surpluses exist, they will be shipped to foreign lands. All the while we will continue paying huge prices at the pump. Just like the late 70′s inflation destroying the US economy (oil the culprit), we are seeing it again now. What used to be expendable income for most US citizens, goes straight into the pockets of our major oil companies today. We are becoming used to high gas prices and our leaders are incapable, unable or unwilling to do anything about it. Yes, we need a national energy policy. No, we won’t get one…

Bobby Vassallo

Bobby Vassallo
March 9, 2013 at 10:06 am

Can You Guess Where the Latest Oil Boom is Occurring?

5 Responses to Can You Guess Where the Latest Oil Boom is Occurring?

Leave a Reply Cancel reply

Posts