The Strategist

The US is about to become the world's leader in oil production

09/13/2018 - 15:12

Most likely, the US outstripped Russia and Saudi Arabia in terms of production, thus becoming the largest oil producer in the world, stated the Energy Information Administration (EIA) of the US Department of Energy, based on preliminary data of the short-term energy forecast.

In August, the production of crude oil in the United States averaged 10.9 million barrels per day (bpd), which is 120 thousand barrels more compared to June. EIA predicts that in 2018, crude oil production in the US will be 10.7 million bpd, compared with 9.4 million bpd in 2017 and an average of 11.5 million bpd in 2019.

In February, production of crude oil in the US exceeded the level of Saudi Arabia. During the last two months of summer, the United States bypassed Russia in oil production, reports EIA. According to forecasts, the US will retain its leading position until the end of the year, as well as next year.

The production of crude oil in the US has increased rapidly since 2011. A significant part of the recent growth occurred in such areas as the Permian region in western Texas and eastern New Mexico, the Gulf of Mexico and the Bakken formation in North Dakota and Montana.

The decline in oil prices in mid-2014 led to the fact that US producers reduced their costs and temporarily lowered oil production. However, after crude oil prices rose in early 2016, investment and production began to grow. On the contrary, in recent years Russia and Saudi Arabia have maintained a relatively stable growth in oil production, said EIA.

American oil shale has changed the world energy landscape, CNN writes. Over the past decade, the US has increased its oil production by half. According to the newspaper, the high results once again confirm advantages of drilling technologies used in the USA. Fracking allowed reaching underground oil and gas deposits, while drilling costs decreased.

"This changed the situation for the United States. This means that we can be sustainable and competitive, "said Ben Cook, portfolio manager at BP Capital Fund Advisors, a company that manages investments in energy.

The leader of the shale boom was Texas. Large producers of oil, including ExxonMobil and BP, have poured millions in obtaining fields in the Permian basin. Texas is already close to producing more oil than Iraq or Iran. This would make Texas the third country in the world, if the state was a whole country. 

However, Texas is gradually becoming a victim of its own success. The situation comparable to the era of the "gold rush" creates infrastructure problems: not enough equipment, pipelines, workers' hands. As a result, according to forecasts, production will grow, yet still not as fast as expected. Therefore, the EIA lowered the forecast for production in the US in the next year to 11.5 million barrels per day. But even with this indicator, the country will remain the world's largest producer of oil, CNN notes.