Oil production to grow at fastest rate ever

Driven by the shale boom, the United States in 2014 will hit its highest daily oil production level since 1988 and will grow oil output at the highest rate ever, the U.S. Energy Information Administration predicted Tuesday.

U.S. daily oil production, which averaged 6.4 million barrels a day in 2012, will surge 23 percent to average 7.9 million barrels a day in 2014, the administration said.

The daily production rate will jump 900,000 barrels between 2012 and 2013, a record for growth in a single year, EIA Administrator Adam Sieminski said in a conference call with reporters. The previous record of 800,000 barrels per day was set a year ago and was the largest one-year jump since 1951. Oil was first produced in the United States in 1859.

“That is the largest single-year growth in U.S. production all the way back to the drake oil well in Titusville, Pennsylvania in 1859,” Sieminski said. “That is pretty impressive.”

While the administration is confident in its predictions, Sieminski said any regulatory changes that affect production of oil and gas from shale could change the outlook.

“If there were to be changes associated with hydraulic fracturing, which is the basis for the growth in natural gas and oil, that would raise costs in that area that could have some impact,” Sieminski said.

The trend of production growth will come along with a drop in oil prices that is expected to bring gasoline prices down for consumers, the administration said.

Prices are expected to drop from an average of $3.63 for a gallon of regular in 2012 to an average of $3.34 in 2014, according to the government projections.

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Natural gas, on the other hand, will continue to face low prices because of large quantities in surplus and slow moving demand.

Natural gas prices averaged about $4.00 per million British thermal units in 2011 and fell to an average of $2.74 in 2012 amid large oversupplies of the resource, the agency said. Prices are expected to rise to an average of $3.74 in 2013 and $3.90 in 2014, according to the projections.

That would leave natural gas prices well below the levels that producers like Chesapeake Energy Corp. say they are hoping for to help fuel production growth and profits.

“I think the industry has said that the number’s probably north of $5 before gas plays generate the same kind of returns that you can get from oil around $90,” Chesapeake Energy CEO Aubrey McClendon said in a conference call in August.

World oil prices are expected to fall in the coming years, the administration predicted.

The price of Brent crude, used as a benchmark for world oil, averaged $112 per barrel in 2012 and will fall to an average of $105 in 2013 and $99 in 2014, the EIA said.