Report: U.S. energy industry flirting with all-time high crude-oil production record

posted at 4:21 pm on December 16, 2013 by Erika Johnsen

In yet another testament to just how big a thank-you the Obama administration owes to the oil-and-gas industry and particularly hydraulic fracturing for helping to spur onward what has otherwise very largely been a paltry excuse for an economic “recovery,” the Energy Information Administration released their 2014 energy outlook report on Monday — and the United States has not only far and away surpassed the EIA’s own forecasts of yesteryear but is on track to hit new production records. The Financial Times summarizes:

US crude oil production will come close to its record highs in just three years time as the shale boom sends output soaring, according to the government’s Energy Information Administration.

The forecast marks a spectacular reversal from the assumptions of five years ago, when US crude production appeared to be in inexorable long-term decline.

The EIA said on Monday that it had revised sharply higher its estimates of future US crude output to about 9.5m barrels a day in 2016. That is very close to the previous peak in US production of 9.6m b/d in 1970 and almost double its low point of 5m b/d in 2008. …

A year ago, the EIA was predicting US crude production of about 7.5m b/d in the second half of this decade, a level that has already been surpassed this year. …

For natural gas, meanwhile, the EIA is predicting continued indefinite growth in production. Gas is easier to produce than oil from shale and other “tight” rocks, and by 2040 the EIA expects US production to be 56 per cent higher than in 2012.

A major surge in oil production, and indefinite growth in natural gas — and yet we’re still holding back on increasing exports on both counts? “How Not to Unleash Your Economy,” anyone? Because there are plenty of potential buyers out there ready and rarin’ for us to get on it, via Reuters:

European negotiators, hoping to cut fuel bills, will press their U.S. counterparts in Washington this week on including energy exports in a transatlantic trade pact that aims to integrate two markets accounting for half the world’s economy.

Bringing politically sensitive energy into the debate stands to complicate talks spanning agriculture to finance, but the rewards could be big for the European Union, where natural gas prices are around three times those in the United States. …

“There is no reason why U.S. natural gas should be reserved for users in the United States,” said a senior EU official close to the negotiations.

Nope — especially not if the United States wants to take even better advantage of our thriving oil-and-gas sector by opening it up to the economic benefits of free trade on a more global market.


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Drill baby drill!

Those libtards who said we couldn’t drill our way to energy independence and must use windmills, fairy farts, biomass, solar at 5-10x price have caused an immense amount of harm to the nation.

txdoc on December 16, 2013 at 4:30 PM

Gotta be good for the government spenders. We just installed a pool with a hot tub. It took one hour for the 400,000 btu heater to warm the water from 62 to 100 degrees and we ran it for another hour. Cost, $12 to heat it up and another $3 to keep that way for an hour. On top of that $15 was added another $5.29 in various taxes and fees.

DanMan on December 16, 2013 at 4:30 PM

And gasoline is still above $3.00 a gallon?

BobMbx on December 16, 2013 at 4:30 PM

Nice. And where are all of the “peak oil” crowd now? Matt Savinor, Kenneth S. Deffeyes and Matthew Simmons I am looking at you and others. Oh that’s right, they are now “predicting” the end of the US Dollar as the worlds Reserve currency.

Johnnyreb on December 16, 2013 at 4:31 PM

Capitalism.

libtardie on December 13, 2013 at 10:19 PM

Murphy9 on December 16, 2013 at 4:31 PM

A major surge in oil production, and indefinite growth in natural gas — and yet we’re still holding back on increasing exports on both counts? “How Not to Unleash Your Economy,” anyone? Because there are plenty of potential buyers out there ready and rarin’ for us to get on it.

Obama and his Marxist buddies are holding America back. Period.

redguy on December 16, 2013 at 4:31 PM

“There is no reason why U.S. natural gas should be reserved for users in the United States,” said a senior EU official close to the negotiations.

FU, you socialist prick. Go outside and blow on a windmill or something. Be productive.

BobMbx on December 16, 2013 at 4:34 PM

Johnnyreb on December 16, 2013 at 4:31 PM

yep, weren’t they predicting Peak Oil in 1978 or something? That was the era of ‘even-odd’ as I recall.

DanMan on December 16, 2013 at 4:38 PM

But, but… global manmate climbing change or something! Why do you hate the environment? LEAVE MOTHER EARTH ALONE, WAHHHH!

/

Ahem.

Midas on December 16, 2013 at 4:40 PM

Thank goodness we have a department of energy or none of this would be possible.

/

Lost in Jersey on December 16, 2013 at 4:41 PM

yep, weren’t they predicting Peak Oil in 1978 or something? That was the era of ‘even-odd’ as I recall.

DanMan on December 16, 2013 at 4:38 PM

And global overpopulation, mass starvation, global cooling, etc.

Midas on December 16, 2013 at 4:41 PM

And gasoline is still above $3.00 a gallon?

BobMbx on December 16, 2013 at 4:30 PM

My guess is $2.20-$2.50 a gallon is the lowest you’re going to be able to get gasoline prices, because that would translate into about $60 a barrel oil. Once you get below that price, the cost for most of the new discoveries made viable by hydraulic fracking become financially unprofitable, and all the fracking-created drilling activity goes away, as was the case in 2008-09, when oil prices plunged from $147 to $38 a barrel, and drilling stopped.

So basically, the U.S. can be more energy independent, but to be more energy independent with gas prices at $1.40 a gallon will require new technological advances in drilling that sharply drop extraction costs (There are places right now where oil isn’t present in great amounts, but natural gas is. However, it’s not profitable to go after the gas via fracking at $3-$4 per mcf, as opposed to the $6-$10 mcf that was there in the 2006-08 period. So if the U.S. were to export natural gas and that caused a price rise, it would also cause some production areas to come back on line for new drilling activity.)

jon1979 on December 16, 2013 at 4:42 PM

What’s missing from this argument is this: if we are so awash in these unbelievably bountiful resources that we are complaining that we are being banned from exporting some, why are gas prices still so freakin’ high?

Sorry, but I’m as pro-drilling, pro-oil, hard core righty conservative Tea Partier as one can be, but this is all BS to me if gas prices do not fall as a direct result of this deluge.

Opposite Day on December 16, 2013 at 4:45 PM

European negotiators, hoping to cut fuel bills, will press their U.S. counterparts in Washington this week on including energy exports in a transatlantic trade pact that aims to integrate two markets accounting for half the world’s economy.

Even if US crude oil production has increased above 7.5 million BPD, this is no reason to export crude oil, since our consumption is greater than this figure. What needs to be done is relax environmental laws which prevent the construction of new refineries, so that more of our oil can be processed in the USA, and reduce the need to import refined fuels (and provide extra jobs at US refineries).

Natural gas is a different story. With the boom in fracking, we are producing more natural gas than we consume, and exporting to Europe makes both economic and political sense. Western Europe doesn’t have much natural gas, and is largely dependent on Russia for its needs. If the relationship between western Europe and Komrade Vlad deteriorates, Europe will need a friendly supplier of natural gas, and selling our gas to Europe will help improve our alliance which has lasted since World War II.

But the EPA has even managed to mess up the natural gas market. Before the fracking boom, when the United States imported natural gas, many projects to build liquefied-natural-gas terminals in American seaports were scuttled for “environmental” reasons. If those terminals had been built, they could now be run in reverse to export natural gas, by liquefying American natural gas and loading it in ships sent to Europe.

Also, in 2010, the EPA imposed regulations on carbon dioxide emissions from power plants, which stopped the construction of new power plants, both coal-fired and gas-fired. Gas-fired power plants are much cleaner than coal-fired plants, and with the fracking boom, gas-fired plants are now economically competitive with coal-fired plants, but we are now trying to export cheap gas instead of burning it to make cheap, clean electricity here at home!

The energy future of this country could be a LOT brighter if Obama’s EPA didn’t get in the way. Instead, Obama is still focused on “investing” in solar panels, windmills, and electric cars. Haven’t we already lost enough money on Solyndra and Fiscal Karma?

Steve Z on December 16, 2013 at 4:54 PM

What’s missing from this argument is this: if we are so awash in these unbelievably bountiful resources that we are complaining that we are being banned from exporting some, why are gas prices still so freakin’ high?

Sorry, but I’m as pro-drilling, pro-oil, hard core righty conservative Tea Partier as one can be, but this is all BS to me if gas prices do not fall as a direct result of this deluge.

Opposite Day on December 16, 2013 at 4:45 PM

Yeah, I’m not entirely understanding this either. It would seem to indicate that our ‘supply’ is being shipped elsewhere to meet ‘demand’, leaving our prices higher than they might otherwise be.

So basically, the U.S. can be more energy independent, but to be more energy independent with gas prices at $1.40 a gallon will require new technological advances in drilling that sharply drop extraction costs…

jon1979 on December 16, 2013 at 4:42 PM

So we’re producing near record levels of crude, but spending considerably more to do so than we did when we were producing similar supply?

Midas on December 16, 2013 at 4:54 PM

Gah, quote formatting fail.

Curse you, George Bush! *shakes a sarcastic fist towards the sky*

Midas on December 16, 2013 at 4:55 PM

Steve Z on December 16, 2013 at 4:54 PM

Yes; why would we export *any* oil if we’re not already producing enough to meet our own demand? Can we buy someone else’s abroad for less than we can sell our own? Seems… unlikely?

Midas on December 16, 2013 at 4:57 PM

When it comes to crude oil we are still consuming 2.5 times of what we produce so it makes no sense exporting oil when we can consume all of our current production in our domestic market… However when it comes to Natural Gas we are probably producing or can produce more than we consume and hence we can export it…

mnjg on December 16, 2013 at 5:02 PM

Midas on December 16, 2013 at 4:57 PM

Different types of crude for different refineries and different types of refined products. It is not all the same.

jon1979 on December 16, 2013 at 4:42 PM

It will be difficult to hit price per gallon that low. Some tight shale formations require $100 per bbl oil just to break even or we would already be producing more.

Nevada would be bigger than Eagle Ford and Bakken put together but for the problem that those production zones are quite a bit deeper and would require $200 per bbl oil to justify investment.

Kermit on December 16, 2013 at 5:03 PM

And gasoline is still above $3.00 a gallon?

BobMbx on December 16, 2013 at 4:30 PM

The only way this makes sense is that other oil producers in the global oil market are producing much less than the US is right now. And I wouldn’t know why that would be.

Bitter Clinger on December 16, 2013 at 5:03 PM

Peak oil!!!!!!!!!!!!![/leftists]

jukin3 on December 16, 2013 at 5:05 PM

sounds like a good time to build some refineries

dmacleo on December 16, 2013 at 5:05 PM

damn, clicked post on accident
not all crude=gas.
and even if it did w/o refineries it means nothing.

dmacleo on December 16, 2013 at 5:07 PM

damn, clicked post on accident
not all crude=gas.
and even if it did w/o refineries it means nothing.

dmacleo on December 16, 2013 at 5:07 PM

We have over 600,000 barrels per day of refining capacity shutdown permanently and more to come. We have excess capacity rather than not enough.

Kermit on December 16, 2013 at 5:09 PM

Midas on December 16, 2013 at 4:57 PM

I think some your answers are listed above…much higher production costs being the most prominent. Also note that except here most oil sold on the world market is controlled through the country of origin’s government. A huge release of product will destabilize their incomes as it lowers prices. But eventually it can go below the cost to produce.

DanMan on December 16, 2013 at 5:10 PM

European negotiators, hoping to cut fuel bills, will press their U.S. counterparts in Washington this week on including energy exports in a transatlantic trade pact that aims to integrate two markets accounting for half the world’s economy.

Where I would see the possibility of US energy exports would be, not in crude, but in natural gas. Many in northern Europe are dependent on Russia for natural gas supplies – and Russia has not hesitated to use those supplies as political leverage on its neighbors / customers. Japan is another ally who can benefit from North American energy as opposed to importing so much from the Middle East.

We’re hitting record levels of production despite all of the efforts undertaken by the Administration to curtail and limit the production of fossil fuel energy on federal lands, offshore, and in many cases via fracking. This is a huge mistake.

It’s time for the US to embark on a close energy alliance / pact with Canada, and really work to expand our energy production. Between the US and Canada, enough crude can be produced to not only cover our needs, but position us to break the OPEC cartel if we so desire. At the very least, we should be able to drop significantly the costs of energy in our own economy…which should have a real positive impact.

Athos on December 16, 2013 at 5:12 PM

sounds like a good time to build some refineries

dmacleo on December 16, 2013 at 5:05 PM

and don’t use the excuse about the never permitted refinery up in the Dakotas as a reason. Problem is that that was a scam to begin with. They never even made any commitments to even leasing the land, much less buying it and never applied for permits.

Kermit on December 16, 2013 at 5:13 PM

So we’re producing near record levels of crude, but spending considerably more to do so than we did when we were producing similar supply?

Midas on December 16, 2013 at 4:54 PM

Under current technology, that’s pretty much it until extraction efficiency improves. I’m in an area of West Texas that had virtually no drilling activity pre-fracking, but has over 70 wells being drilled right now. However, when Clayton Williams was in town at the start of the current boom two years ago, he basically told people he loved them with oil at $80 a barrel, but he was outta here if oil dropped to $70 a barrel.

If future advancements allow oil to be extracted via fracking and still be profitable at $70, $60 or $50 a barrel, then the U.S. can have cheap gas and energy independence. Right now, it can only have a little cheaper gas that current prices — get it down to $2 a gallon, and that means oil prices will be low to the point that buying from the Saudis again becomes more practical than drilling it ourselves.

jon1979 on December 16, 2013 at 5:14 PM

I strongly suspect a direct correlation with the 50% increase in Arctic Sea ice over this time in 2012.
Hey, my guess is as accurate as anything the Goracle has spewed over the past decade.

M240H on December 16, 2013 at 5:16 PM

jon1979 on December 16, 2013 at 5:14 PM

Keystone XL along with reversing Capline would go a long way to that. That oil was originally to be contracted at $58 per barrel. That being said, it could only be used by certain refineries with complexity and configuration for heavy crude of which there are a little over a dozen of them in TX & LA but they are all major refineries.

Kermit on December 16, 2013 at 5:20 PM

It will be difficult to hit price per gallon that low. Some tight shale formations require $100 per bbl oil just to break even or we would already be producing more.

Nevada would be bigger than Eagle Ford and Bakken put together but for the problem that those production zones are quite a bit deeper and would require $200 per bbl oil to justify investment.

Kermit on December 16, 2013 at 5:03 PM

That’s the thing people don’t understand — there really were some areas of the country 100 years ago where you could use the Jed Clampett drilling technique of shootin’ for some food and up through the ground would come a bubblin’ crude. But many of the new fracking plays are 10,000 to 22,000 feet underground, or the shale itself is so prone to fractuing itself within the oil-producing layers you can’t really get it out easily even when you find it.

Out here in West Texas, the only gas that’s being hunted right now is ‘wet gas’ where you can basically chill it and evaporate other petrochemicals out to sell separately and the added value then justifies the drilling. ‘Dry’ gas formations along the eastern slope of the mountains in Texas — where there’s nothing to be extracted out — aren’t being drilled because you can’t earn your money back based on the cost to frack it.

jon1979 on December 16, 2013 at 5:21 PM

Keystone XL PLUS Capline would equal 2 million BPD pipeline capacity. Capline is easy since the permits are already issued for Enbridge to expand its existing pipeline to Capline’s northern terminus near Chicago, IL.

Kermit on December 16, 2013 at 5:24 PM

jon1979 on December 16, 2013 at 5:21 PM

Almost no wells are being drilled to search for just gas right now. Many are being produced just to service debt and at a loss. You are correct. NGL’s contained in “wet gas” make more money than oil.

Kermit on December 16, 2013 at 5:25 PM

BTW, FRACK is not in the Society of Petroleum Engineering lexicon, but FRAC is.

Please don’t use the leftist spelling.

Kermit on December 16, 2013 at 5:36 PM

Yeah, I’m not entirely understanding this either. It would seem to indicate that our ‘supply’ is being shipped elsewhere to meet ‘demand’, leaving our prices higher than they might otherwise be.

So basically, the U.S. can be more energy independent, but to be more energy independent with gas prices at $1.40 a gallon will require new technological advances in drilling that sharply drop extraction costs…

jon1979 on December 16, 2013 at 4:42 PM

So we’re producing near record levels of crude, but spending considerably more to do so than we did when we were producing similar supply?

Midas on December 16, 2013 at 4:54 PM

We are producing more crude oil but there has not been a new oil refinery built in the US since 1978 to turn that crude into gasoline. We are importing refined oil products, but exporting crude oil.

I know it sounds stupid, but there it is.

Johnnyreb on December 16, 2013 at 5:46 PM

http://www.eia.gov/dnav/pet/pet_pnp_cap1_dcu_nus_a.htm

Data table showing refinery capacity/idle from Energy Information Administration

Murphy9 on December 16, 2013 at 5:50 PM

It’s time for the US to embark on a close energy alliance / pact with Canada, and really work to expand our energy production. Between the US and Canada, enough crude can be produced to not only cover our needs, but position us to break the OPEC cartel if we so desire. At the very least, we should be able to drop significantly the costs of energy in our own economy…which should have a real positive impact.

Athos on December 16, 2013 at 5:12 PM

” The flood of North American crude oil is set to become a deluge as Mexico dismantles a 75-year-old barrier to foreign investment in its oil fields.

Exxon’s forecast, compiled annually by a team of company economists, scientists and engineers, didn’t take into account any changes in Mexico, William Colton, the company’s vice president of strategic planning, said during a presentation at the Center for Strategic and International Studies in Washington on Dec. 12.

Opening Mexico’s oilfields to foreign investment would be “a win-win if ever there was one,” said Colton, who described the move as “very good for the people of Mexico and people everywhere in the world who use energy.”

The bill ending the state monopoly was approved by the Mexican Congress Dec. 12. Before becoming law, the proposal must be ratified by state assemblies, most of which are controlled by proponents of the reform. Oil companies will be offered production-sharing contracts, or licenses where they get ownership of the pumped oil and authority to book crude reserves for accounting purposes. The contracts will be overseen by government regulators.

The bill ending the state monopoly was approved by the Mexican Congress Dec. 12. Before becoming law, the proposal must be ratified by state assemblies, most of which are controlled by proponents of the reform. Oil companies will be offered production-sharing contracts, or licenses where they get ownership of the pumped oil and authority to book crude reserves for accounting purposes. The contracts will be overseen by government regulators…

The reforms are especially important to open up exploration in Mexico’s deep-water fields, where additional capital, as well as better technology and expertise are needed, Carlos Solé, a Houston-based partner at Baker Botts LLP, said in a telephone interview. Pemex estimated the country’s deep-water Gulf of Mexico prospects may hold the equivalent of 26.6 billion barrels of crude.

Onshore, the potential is even greater with more than 60 billion untapped barrels, according to a Pemex presentation last month.

Some of the potential shale production sits across the border from Texas’s prolific Eagle Ford formation. The most resource-rich area studied so far is around the city of Tampico, a coastal city about 300 miles (480 kilometers) south of the bottom tip of the Texas border.

“I can’t tell you the amount of banks and investment funds coming from the U.S. and Europe that have been talking to us and are trying to have an expectation of what’s going to happen with the energy reform,” Prado said. “All those guys are going to be in Mexico next year in various forms trying to seek new opportunities…”

http://www.bloomberg.com/news/2013-12-16/north-america-to-drown-in-oil-as-mexico-ends-monopoly.html

workingclass artist on December 16, 2013 at 6:01 PM

Johnnyreb on December 16, 2013 at 5:46 PM

We have exported crude oil from Valdez AK since the pipeline was built otherwise no we haven’t thus far.

We have plenty of refining capacity with some on the market to be sold and others being demolished right now.

Kermit on December 16, 2013 at 6:28 PM

Remember when all the Lefties were whining about Peak Oil!

JeffB. on December 16, 2013 at 7:10 PM

Why do people keep saying gas prices are high?

They aren’t.

1. Check inflation adjusted prices.

2. In Colorado, total taxes are about 40 cents a gallon. My last purchase was at $2.49 a gallon. That’s $2.09 for the actual product. But wait, there’s more! How much do the various seasonal blends add to prices in your area? We are on ethanol at this time of year, I don’t know the cost, but it needs to be subtracted.

Gasoline is not expensive.

Meremortal on December 16, 2013 at 7:49 PM

Report: U.S. energy industry flirting with all-time high crude-oil production record

Woo-hoo! I was wondering why gas prices were going down. You know, “supply and demand” and all that.

Meremortal on December 16, 2013 at 7:49 PM

I’m sure the oil companies appreciate your help in this matter. I’d also like to see your defense of major insurance and healthcare companies concerning their role in Obamacare.

“Competition is evil.”

We’ll be eating our pets and dandelion soup and we’ll still have to listen to some go on about the virtues of a pure free enterprise system that never existed.

Thievery disguised as capitalism is in the end just thievery.

Dr. ZhivBlago on December 16, 2013 at 11:02 PM

The Department Of Energy set up by President Carter over thirty years ago to get us off foreign oil that had a budget this year of 23.3 billion dollars and 16,000 employees has not done their job for over thirty years. Maybe now Congress can defund the DOE as a lost cause. Yeah, right, fat chance.

mixplix on December 17, 2013 at 4:49 PM