U.S. oil gusher blows out projections

The United States’ rapidly declining crude oil supply has made a stunning about-face, shredding federal oil projections and putting energy independence in sight of some analyst forecasts.

After declining to levels not seen since the 1940s, U.S. crude production began rising again in 2009. Drilling rigs have rushed into the nation’s oil fields, suggesting a surge in domestic crude is on the horizon.

The number of rigs in U.S. oil fields has more than quad­rupled in the past three years to 1,272, according to the Baker Hughes rig count. Including those in natural gas fields, the United States now has more rigs at work than the entire rest of the world.

“It’s staggering,” said Marshall Adkins, who directs energy research for the financial services firm Raymond James. “If we continue growing anywhere near that pace and keep squeezing demand out of the system, that puts you in a world where we are not importing oil in 10 years.”

There are doubts that energy independence is that close. But many say the booming shale oil fields in Texas and North Dakota and the growth of deep-water drilling in the Gulf of Mexico will allow the nation to cut its reliance on oil imports significantly over the next couple of decades.

Last month, the U.S. Energy Information Administration upgraded its forecast of crude production in 2025 to 6.4 million barrels per day – 1 million barrels more than were pumped in 2010.

Previously, the EIA had projected the U.S. would peak at 6 million barrels in 2022.

“The growth that we’ve seen in shale, that’s one of the biggest changes that’s contributing to our outlook,” said Dana Van-Wagener, a research analyst for the agency. “It’s evolving so quickly. We weren’t anticipating enough growth.”

Crude prices stable

By the EIA’s forecast, the United States will challenge Saudi Arabia as the world’s top oil producer when crude and other forms of liquid petroleum are included. But the U.S. is also the world’s top oil consumer, demanding nearly 20 million barrels a day. So even with an oil boom, the nation still falls far short of its energy demands.

The technology that fueled the national shale gas rush is moving into oil fields. The pairing of fossil fuel production techniques called horizontal drilling and hydraulic fracturing allowed companies to access previously hard-to-reach natural gas trapped in dense shale rock.

The rush has unleashed a flood of natural gas onto the U.S. market, causing price to dive and making some gas wells uneconomical. Companies have started to close natural gas wells and pull rigs out of gas fields.

Meanwhile, crude oil prices have remained high, with the domestic benchmark West Texas Intermediate price rising 93 cents to $103.24 on Friday.

Pumping crude out of shale rock is more expensive and difficult than getting at natural gas, said Eric Potter, program director for energy research at the University of Texas at Austin’s Bureau of Economic Geology.

Oil molecules are larger and harder to squeeze through the cracks created by hydraulic fracturing. But the high price of crude makes it worthwhile for many companies.

“With natural gas prices being as low as they are, your company could go out of business if you don’t manage this carefully,” Potter said. “People are moving quickly to get into these oil plays. It’s a matter of their existence.”

The Eagle Ford Shale in South Texas, the Permian Basin in West Texas, and the Bakken Shale in North Dakota have been hubs of the domestic crude boom. They now make up about 40 percent of the nation’s land-based oil production, noted Adkins, the Raymond James analyst. He projects that proportion will grow to two-thirds by 2015.

Fields underestimated

Adkins says the Energy Information Administration is vastly underestimating the rapid growth of those oil fields. He believes that crude oil production in the United States will reach 9.1 million barrels by 2015, some 45 percent more than the EIA’s forecast.

The reason for the varying projections about the nation’s crude potential is uncertainty about how much oil is underground and whether technological advances will make it reachable.

That also causes debate about future crude oil prices.

Adkins, for example, says the rising production will help reverse the surging price of oil, pushing it down to $90 per barrel next year.

Forecast: $4.09/gallon

Others, however, believe oil prices will continue to rise despite the growing supply coming out of U.S. oil fields. Domestic crude prices are closely tied to the world market.

That makes domestic prices susceptible to the global Brent crude benchmark price, which is on the rise due to foreign conflicts and rapidly growing energy demands in developing countries.

The EIA projects the average world oil price will reach about $145 per barrel in 2035, in current dollars, compared to the 2011 average of $93 per barrel. Meanwhile, the agency forecasts gasoline in America will rise to $4.09 per gallon.

“As far as drilling and production, it’s going to be really good and robust,” said Michelle Michot Foss, chief energy economist for the University of Texas Bureau of Economic Geology. “But consumers will be upset because gasoline prices will continue to be high.”

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35 Comments

  1. OLD FOGEY 74

    Not if the nObamunists have anything to say about it…

    #1
  2. So we drill more and the price at the pump still increases. Our drilling more is not making us less dependent on foreign oil. Our drilling more only means we will export more to keep the price up. It is time for the government to add an additional tax of 25 dollars per barrel to all exported oil and lower the tax at the pump.

    #2
  3. lgccac

    If this is true, I find it amazing considering the anti-oil industry policies of the Obama regime.

    #3
  4. Scott

    Saying that “net speculative positions are four times as high as in June 2008,” investment banker Goldman Sachs “issued a warning that the price of oil has grown out of control due to excessive speculation.” The world’s largest commodity trader, Goldman Sachs told its clients that it believed speculators like itself had artificially driven the price of oil at least $20 higher than supply and demand dictate. They even admitted that their work to drive up prices has harmed the American economic recovery, pointing to “nascent signs of oil demand destruction in the US.”

    #4
  5. Peterr

    Scott, you have ‘hit the nail on the head’. Plus the fact that oil companies produce the oil, transport it, refine it, and sell it at the pumps. They have a hand in it all the way. They are on a ‘win-win’ situation.

    #5
  6. chiefdecoy

    Scott is dead on…..
    However, that will not stop the egg-head speculators from using Iran tensions to drive up the price….

    #6
  7. Daniel

    With wages and bennies being what they are in the states, anything over around $70 per bbl makes it profitable to drill.
    Scott’s information is where the problem lies with prices, but I will look for confirmation of that.

    #7
  8. SaltWaterCroc

    I’m sure Obama is to blame for everything bad; anything positive, it must be market forces at work.

    #8
  9. Mark from Louisiana

    In his campaign a few years ago, obama said he would introduce legislation to prevent high oil prices due to commodity speculation…..I guess he just hasn’t had time to follow up on his promise.

    #9
  10. Mr. Stretcy

    SaltWaterCroc ++++!!!

    #10
  11. Mr. Stretcy

    Mark from Louisiana wrote

    “In his campaign a few years ago, obama said he would introduce legislation to prevent high oil prices due to commodity speculation…..I guess he just hasn’t had time to follow up on his promise.”

    No doubt the GOP led House and the GOP minority of the Senate would fight him on that because they love to help the oil companies make more so they can keep sending in their checks to help them with re-election!

    #11
  12. PaleRider

    The Lone Star is rising. The oil business is not going away anytime soon, not at all. Nice to see it is booming in spite of Obama’s overall hate for the industry!

    Go XOM – love those dividends!

    #12
  13. Mark from Louisiana

    Mr. Stetcy, he had total control of congress for two years, if he had wanted that legislation he would have gotten it.

    Funny how the media would blame Bush for high gas prices non stop, but now they are talking supply and demand and saying obama can do nothing about the high prices. Then they talk about the increased production in America, which is the results of wells approved….by Bush.

    #13
  14. georgex

    Since 2009 we can see this rise so it is puzzling when people want to claim that President Obama is hurting oil production. Of course, there was a slow down after the disastrous leak in the Gulf and regulations and enforcement had to be reviewed. But some of the negative comments don’t face the reality of the increased production.

    #14
  15. Paul

    Yeah fellas…that’s why oil production has been on the rise since Obama took office at the highest rate in well over 30 years…cuz’ he’s a communist who “hates the oil industry.” I didn’t even vote for the guy, but to think anyone would even take these kinds of “comments” w/o a pound of salt would be comical in itself if it wasn’t such a serious issue.

    We don’t need coal, oil, gas, pipelines, etc. like we’ve been led to believe all these years. I guess that’s what decades of paying off our politicians will do for the industry.

    #15
  16. Joe the Oilman
    #16
  17. Young Folgey

    Old Folgey,
    The funny thing is that since you call yourself old in the first place, you’ll never see how wrong you are.

    Thanks for selling out out future for a quick buck. I’m sure the Middle East dictators, China which has the largest lithium reserves on the planet (good for lithium batteries) really appreciate this foresight.

    We’re drilling more, but prices are still sky high. Anti-oil Obama regime for sure.

    Git r Dun.

    #17
  18. Young Folgey

    Mark from Louisiana,
    Most people recognize that Bush II was not responsible for oil prices skyrocketing. However, he did have very significant actions that did effect oil price.

    Bush claimed that the Iraq war was to be paid for by oil revenue generated in Iraq. That didn’t happen, The American taxpayer has been paying for it. You would also think an acquired source of petroleum would also decrease prices, that didn’t happen either.

    So while he didn’t control OPEC he did have a heavy hand in Iraq that yielded negative results. Good straw man, by the way. You sound smart.

    #18
  19. CAD1936

    As well illustrated in many of these posts, there is no showing of care and/or concern, expressed by the folks in the industry, for the care of the environment, employee safety, or the health and welfare of the American people. Profits are the only thing they care about, often to the detriment of many other legitimate concerns of the people of this country and its government!

    #19
  20. Realist

    First–I think this is one of the best sources for real energy news. A really well-done source.

    Second, the COMMENTS always make me smile. No matter what happens, it’s Obama’s fault! Unless it’s something good. Y’all Obama-haters would be well-advised to check how much the LOONY LEFT hates Obama as well–that he sold out liberal plans, etc. My guess: he really is a centrist politician who says what ever he has to get ahead. Just like all the other politicians in this country, with a few exceptions (Paul, i.e.). Obama is not the anti-Christ. He’s just a politician.

    #20
  21. Ken

    The solution for high crude oil prices and low natural gas prices is to convert cars and trucks to run on natural gas.

    #21
  22. Peter Roach

    The better oil news gives us breathing room to transition to other forms of energy such as the biodiesels.
    But, we better work in this direction.

    #22
  23. georgex

    Two gasoline refineries are closing and that has something to do with the rise of the price of gasoline. Don’t know why gasoline producers can not make enough with these high prices.

    #23
  24. aeroguy48

    The headline made me believe we had hit a big oil gusher, but no just a generic piece on more drilling here.

    #24
  25. Bob A

    We must get rid of the Democrat energy terrorists first.

    #25
  26. David Gower

    Scott and others, are new margin requirement laws needed or do present laws need to be enforced? Maybe margin requirements need to float like interest rates. The problem with that is coming up with a “regulator” agreeable to the majority. The Federal Reserve model could be used even though many see it as less than optimal. I would be for giving an enforced floating margin requirement a try.

    #26
  27. Mkelley

    At least up here in the Bakken, the boom is happening despite the US government, not because of it. Most of the drilling up here is going on because it is on private land. The BLM and Forest Service are dragging their feet bigtime in granting permits for drilling. This is of course part of Obama’s lefty agenda to give the Sierra Club everything it wants and screw us working people.

    #27
  28. mark

    The US sells it’s oil on the global market instead of using it here first then selling the excess. The kick is the oil companies refine it and then sell it as gasoline first. Other countries are selling their gas for a dollar a gallon to it’s citizens before selling it at a much higher price to the US.

    #28
  29. Observer

    For a consistent source of uninformed, biased, unhelpful, non-factual, counter-productive, misleading, totally prejudiced commentary, one always turns first to the almost limitless number regularly showing up on Fuel Fix.

    How can it be possible that so many given that wonderful Public Education available to all in the U.S. along with ready access to the wisdom of the professorial masters of our numerous great universities and colleges can be so ignorant about matters of such fundamental and enduring strategic importance to the welfare of the American people and the security of these United States?

    May the Great God in Heaven please, please shed a modicum of understanding (along with your usual helping of Grace) on so many in this once great democracy called the United States of America.

    Oh and will the last person out, please be sure to turn off that final existing 50 watt bulb remaining alight on that “Shining City on the Hill.”

    #29
  30. JB

    There are less places refining the oil. That is what is causing most of the issues.

    #30
  31. comkid

    Time to start looking into “natural gas to liquid”

    #31
  32. naturalgasman

    Time to start looking into natural gas to liquid

    #32
  33. naturalgasman

    natural gas to liquid

    #33
  34. naturalgasman

    Time to move forward and start natural gas to liquid.

    #34
  35. calico

    Oil production from US Federal lands is down 11% year over year. The increase is from privately-owned land.

    #35