U.S. set to become world’s top oil producer
The new Saudi Arabia?
American could surpass Saudi Arabia to become the world’s leading oil producer in the near future.
American crude and liquid hydrocarbon output is set to rise by 7 per cent this year to just under 10.9 million barrels/day.
The US energy department predicts that this figure will rise to 11.4 million barrels per day by the end of 2013, falling just short of Saudi Arabia’s output of 11.6 million. Analysts at Citibank forecast that this figure could reach between 13 and 15 million barrels by 2020.
The boom has brought a raft of positive knock-on effects for the US economy, with ExxonMobil announcing a $1.6bn investment package in US oil last month.
States involved in the exploration, transport and refining of crude such as Texas, North Dakota, Oklahoma, Wyoming and Montana have benefited most from the surge in output. All have unemployment rates far lower than the national average of 7.8 per cent, with South Dakota’s unemployment level reaching just 3 per cent.
IHS CERA, an energy consulting firm, predicts that the hydrocarbon boom will bring a staggering 1.3 million jobs to the US economy by 2020, adding to the 1.7 million already created by the oil industry.
“Five years ago, if I or anyone had predicted today’s production growth, people would have thought we were crazy”, said Jim Burkhard – chief oil analyst at IHS – to the Associated Press.
Despite the figures, the US will remain a net-energy importer, with imports clocking in at roughly 18.7 million barrels per day. However, future increases in oil production and improving car fuel efficiency could slash this number by come 2020.
There are several factors driving up the American oil boom.
Firstly, the costs of extracting oil from shale and rock formations has plummeted following the development of a technique called “hydraulic fracking”, wherby water, sand and chemicals are pumped into shale formations to squeeze out oil that was previously too expensive to tap.
The amount of oil extracted using this newfound method is expected to grow from 1.6 million barrels per day for 2012 to a 4.2 million per day by the end of the decade.
Furthermore, owing to increased energy demand in the developing world and political instability in the MENA region, oil prices have soared, which in turn has incentivised exploration and covered the high costs inherent to hydraulic fracking. In the 2000s, the price of oil averaged at $69 per barrels, in the 1990s it was just $21 per barrel.
Additionally, a surfeit of gas discoveries in the past few years has freed up capital for greater oil exploration, whilst exploration and production in the Gulf of Mexico has rebounded following the BP oil spill in 2010.