The United States oil nudged in the 11 million barrels per day, mbpd mark to position it as the world’s biggest producer of crude oil in September 2018. From the Short Term Energy Outlook, STEO, records of the United States Energy Information Administration, EIA, it appeared technology and resilient policies of the United States have given a soared domestic production of about 11.6 million barrels of crude oil per day.
Rapid technological advances in drilling through hydrofracking, gave rise to the shale revolution that beat the Peak Oil syndrome of the 70s and unlocked new sources of vast oil and natural gas that had been trapped underground.
With declining production costs the EIA expects the US oil production to stay ahead of Russia and Saudi Arabia to reclaim its lost crown in August 2018. The EIA expects the U.S. crude oil production to remain through 2018 and 2019.
In 2017, China surpassed the U.S. in annual gross crude oil imports by importing 8.4 million barrels per day, bpd compared with 7.9 million bpd of U.S. crude oil imports. Would it be an uphill struggle for America to maintain its acquired new status? It appears the crude oil outlook in 2019 would be a defining moment if the United States light sweet crude continues to exceed Russian and Saudi Arabian crude oil production.
The International Energy Agency, IEA also strongly believes that the American shale revolution would continue to have effect on the global oil industry that oil producers would continue to have shifts in policies and strategies. The IEA latest World Energy Outlook strong view is that the United States will be the biggest contributor to global oil production growth to 2040, accounting for 75 percent of the total world oil production. According to the IEA, “The shale revolution continues to shake up oil and gas supply, enabling the United States to pull away from the rest of the field as the world’s largest oil and gas producer.”
By 2025, nearly every fifth barrel of oil and every fourth cubic metre of gas in the world would come from the United States. The United States Secretary of Energy, Rick Perry in a testimonial said: “For the first time in 60 years, the United States is now the world’s largest producer of oil and natural gas, and we are now exporting natural gas to 30 nations on five continents.
Approving short-term LNG exports from projects like Corpus Christi is just one example of how the Administration is pursuing energy dominance and boosting our economy.” America’s technology indeed, moved so quickly that the resource constraint was more like a blip. But America’s assumed dominance in energy did not come by fiat and flight. It came through diligent prosecution of bipartisan energy policies by successive administrations.
By 2015, the US unconventional crude oil output was nearing 9.5 million barrels per day, a level not seen since 1972, when production went into decline. The shale oil revolution of the United States is indeed, changing crude oil outlook as America has doubled its output in the last decade.
Ten years ago, Nigeria was a major buyer of Nigeria’s Bonny light sweet crude oil; importing over 1 million bpd. The American shale oil has now replaced that of Nigeria that it now has a capability of producing and exporting crude as Congress approved in 2015. The S&P Global Platts Analytics predicts that the US crude oil exports will hit nearly 4 million barrels per day in 2020. If indeed, the rise of the United States shale oil does not plateau in the 2020s and decline in the 2030s, oil dependent nations including OPEC may be in for it.
By 1973, America faced one of its greatest energy challenges when the Middle East members in OPEC slammed an embargo from October 1973 to November 1974. The call by President Richard Nixon for “Independence” in energy in his address to the nation about National Energy Policy on November 25, 1973 was what was followed through till the American shale that appeared to be invulnerable to high production costs.
The shale technology is the result of over 40 years of research and development that increased global glut which ignited the great price of crude crash of 2014. The shale boom is however, not full proof for America. The United States refineries require the heavy sour crudes imported mostly from the Middle East. Revenue generated from its light sweet crude will mitigate crude imports of nearly US$500 billion annually.
Again, the shale wells tend to dry out much more rapidly than conventional wells meaning more investments to drill more wells to sustain output. Expert belief is that no matter how much additional oil America pumps in the years to come, the global oil market will remain global. Oil being the fungible commodity will always be traded, shipped and piped around the world. With all the intervening variables of taxes and government subsidies or taxes, consumers in oil-exporting nations will pay about as much for crude as consumers in oil-importing nations.