US oil industry set to break record, upend global trade
HOUSTON: Surging shale production is poised to push US oil output to more than 10 million barrels per day – toppling a record set in 1970 and crossing a threshold few could have imagined even a decade ago.
And this new record, expected within days, likely won’t last long. The US government forecasts that the nation’s production will climb to 11 million barrels a day by late 2019, a level that would rival Russia, the world’s top producer.
The economic and political impacts of soaring US output are breathtaking, cutting the nation’s oil imports by a fifth over a decade, providing high- paying jobs in rural communities and lowering consumer prices for domestic gasoline by 37 per cent from a 2008 peak.
Fears of dire energy shortages that gripped the country in the 1970s have been replaced by a presidential policy of global “energy dominance.”
“It has had incredibly positive impacts for the US economy, for the workforce and even our reduced carbon footprint” as shale natural gas has displaced coal at power plants, said John England, head of consultancy Deloitte’s US energy and resources practice.
US energy exports now compete with Middle East oil for buyers in Asia. Daily trading volumes of US oil futures contracts have more doubled in the past decade, averaging more than 1.2 billion barrels per day in 2017, according to exchange operator CME Group.
The US oil price benchmark, West Texas Intermediate crude, is now watched closely worldwide by foreign customers of US gasoline, diesel and crude.
The question of whether the shale sector can continue at this pace remains an open debate. The rapid growth has stirred concerns that the industry is already peaking and that production forecasts are too optimistic.
The costs of labour and contracted services have recently risen sharply in the most active oilfields; drillable land prices have soared; and some shale financiers are calling on producers to focus on improving short-term returns rather than expanding drilling.
But US producers have already far outpaced expectations and overcome serious challenges, including the recent effort by the Organization of the Petroleum Exporting Countries (OPEC) to sink shale firms by flooding global markets with oil.
The cartel of oil-producing nations backed down in November 2016 and enacted production cuts amid pressure from their own members over low prices – which had plunged to below US$27 earlier that year from more than US$100 a barrel in 2014. — Reuters