Iowa Public Television


U.S. On Track To See Largest Single Year Gain in Oil Production Since 1951

posted on October 26, 2012

Government reports this week revealed positive developments in America’s manufacturing and housing sectors.

According to the Commerce Department, orders for big-ticket durable goods rose almost 10 percent in September. That’s their largest monthly gain in nearly three years.

Much of the improvement was due to surging demand for commercial aircraft. Stripping out the volatile transportation sector, orders rose a more modest 2 percent.

But, orders for core capital goods -- a barometer of future business investment -- were unchanged.

Earlier in the week the government reported that sales of new U.S. homes rose 5.7 percent last month to a seasonally adjusted annual rate of 389,000… their highest level in two-and-a-half years.

And crude oil prices fell more than $4 this week as the government reported a massive 5.9 million barrel increase in domestic SUPPLIES.

U.S. crude PRODUCTION also is surging. In fact, America soon could overtake Saudi Arabia as the world’s top oil producer.

U.S. On Track To See Largest Single Year Gain in Oil Production Since 1951

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. That would mark the fourth year of increasing domestic production and, if realized, would be the largest single-year gain since 1951.

According to the Energy Department domestic production of crude and other liquid hydrocarbons – including biofuels -- will average a record high of 11.4 million barrels per day in 2013. That would be a record high for U.S. production less than 2 percent below Saudi Arabian output of 11.6 million barrels.

However, the U.S. is still a long ways from energy independence. Currently America uses 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, analysts believe imports could be cut in half by the end of the decade.

A relatively new and controversial process known as hydraulic fracturing, or “fracking” is squeezing oil out of rock once believed to be too expensive to tap.  But it’s also raised concerns in some regions that contaminated water produced in the process could leak into drinking water.

Wood Mackenzie, an energy consulting firm, estimates production from shale formations will grow from 1.6 million barrels per day this year to 4.2 million barrels per day by 2020. 

IHS Cera, another energy consulting group, estimates the boom in unconventional oil and gas production already supports nearly two million U.S. jobs and estimates that number will grow to 3 million positions by the end of the decade.

However, increased production hasn’t translated to cheap gasoline.  Despite recent seasonal declines, prices at the pump are expected to stay relatively high in the years ahead due to increased demand for oil in developing nations and political instability in the Middle East and North Africa.

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.  But over the next 22 years, domestic crude production declined by 44 percent.

As recently as 2006, the U.S. imported nearly 60 percent of the oil it consumed.  By the end of this year, U.S. crude output will be at its highest level since 1998 and oil imports are predicted to fall to just over 40 percent of consumption – their lowest level in two decades.  

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.  While the decline isn’t expected to force oil companies to scale back exploration and production it’s also not a big enough fall to bring back the days of cheap gasoline. 

But, with more of the price at the pump flowing to domestic producers, the U.S. economy is expected to get a much-needed shot in the arm. 

Tags: agriculture Barack Obama Canada debates Mitt Romney oil pipeline Texas TransCanada Corp.


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