Surprising Economic Development

U.S. May Soon Become World's Top Oil Producer

By The Associated Press

Posted 6:25PM 10/23/12

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[You must be registered and logged in to see this image.]By JONATHAN FAHEY, AP Energy Writer

NEW YORK (AP) - U.S. oil output is surging so fast that the United
States 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 ([You must be registered and logged in to see this link.])
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."

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 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.

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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 ([You must be registered and logged in to see this link.], [You must be registered and logged in to see this link.]), which increasingly see the U.S. as one of the most promising places to drill. ExxonMobil ([You must be registered and logged in to see this link.]) 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 ([You must be registered and logged in to see this link.]) 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. [You must be registered and logged in to see this link.]

The problem here is three fold, first of all we are drilling more mostly on (private land) in spite of Obama. Obama cut permits by 39% on fedreal land, secondly, Obama policies enforced through the EPA and the Department of justice have resulted in the closure of 18 Refineries in the US. The fines and equipment being forced on them are making them unprofitable. The refinery in the virgin Islands was being forced to upgrade at a cost of $700 million to meet the EPA standards. They are now closing. Thirdly, Our dollar has decreased in value since Obama took office, printing money day and night, that is not backed up by a dang thing,. Don't look for gas prices to decrease by much if anything. Remember Obama's "Energy Czar", Chu wants our gas prices at Europes level, $8.00 a gallon to forward the green energy cause....... Brilliant!

Snooker, if all you figure is accurate, then the deficits we are running are not what they seem to be because of the devalued dollars. Besides we get to pay off Shrub's massive debt with devalued dollars, win, win. On the same hand gasoline will cost less. I'm paying $3.16 a gallon now, in the summer of 2008 it was over $4.00 a gallon here. By the time gas gets to $8,00 a gallon, our dollars will be worth $,50 so we'll only be paying $4.00 a gallon, back to bushenomics, eh?

Keep forcing refineries to shut down and we will be buying gas from other countries too. Obama hates fosil fuel period. He has made threats on coal companies too. Pretty bad when you have to destroy an industry in order to push an agenda that has no market value. Obama is clueless.

Snooker. I am in the middle of a class on Appalachian History. The American coal industry is almost 100% in this region. The main complaint is on how it is obtained. Talk about 'clean coal' that is blownig smoke up peoples ass. There is no such thing. Now it can be used with clean after effects though. The real problem is raping the Earth when they obtain it. Another problem is the screwing the locals get while this is going on. The latest craze--'mountain top removal'. Yeh, that does sound bad doesn't it? There is a real good one going on right not. A group within the industry is trying to convince the Federal government that the people need an expressway built on top a certain mountain ridge. Now the reality check. This road goes nowhere but to the top of the mountains. It will be used by no one but the coal industry. Now since the are already carving up the mountain ridge for a road, why not remove the mountain an collect the coal. Yeh, all this private industry being subsidized with our dime. After the coal is gone, who will use the road? Exactly nobody. It is these kind of problems Obama is having a problem with. He has no problem with fossil fuel, just the proposed methods. Every one is whining about tha bank and auto bailout. This wouldn't be much different. This has the same result, only this industry is in no fear of failing.