Domestic Crude Oil Production Tipped to Rise

Posted by Jackson Stone on February 3, 2012 at 9:14 pm

The economic downturn has seen less industry. That means lower oil demand as less trucks are needed to moves goods between states. (image: stltoday.com)

US oil production is on the rise and a federal energy agency predicts it will balloon by 20 percent over the next decade, hitting levels unseen since the 1990s, upi.com reports.

In its annual energy outlook for 2012, the US Energy Information Administration estimates that the nation’s daily crude oil production will reach 6.7 million barrels per day by 2020. Figures released by the agency show oil production increased from 5.1 million bpd in 2007 to 5.5 million bpd in 2010.

US Rep. Doc Hastings, R-Wash, chairman of the House Committee on Natural Resources, stated last month that oil and natural gas production on federal lands was down more than 40 percent compared to the early part of the century. However, EIA acting administrator Howard Gruenspecht said current projections indicated that domestic crude oil production was increasing while reliance on imported oil was on the decline.

“These projections reflect increased energy efficiency throughout the economy, updated assessments of energy technologies and domestic energy resources, the influence of evolving consumer preferences and projected slow economic growth,” he said.

The bullish oil production forecasts reflect the current boom in shale oil and gas reserves that lie beneath the US. Unconventional drilling techniques like hydraulic fracturing and horizontal drilling are helping energy companies tap hard to reach pockets of “tight oil” reserves trapped in shale rock. The EIA said further development of oil deposits in the Gulf of Mexico is also expected to bring domestic crude oil production to forecast levels.

Many commentators argue that a plentiful domestic supply of oil would give the US greater energy security and reduce our reliance on foreign oil imports from unstable nations in Africa and the Middle East, where geopolitical developments often spark volatile spikes in world oil prices. Heating oil prices are closely lined to the those of crude. Many heating oil customers are struggling with the high cost of fuel oil, despite a relatively mild winter heating season so far.

The United States’ reliance on foreign oil has been falling with the boom in local production. But, as indicated by Gruenspecht, greater fuel efficiency and economic factors are also at play. Requirements to make new vehicles more fuel efficient are helping curb the nation’s voracious appetite for gasoline. And many states have phased out heavier, dirty heating oil varieties and mandated ultra-low sulfur heating oil in its place. The cleaner-burning oil is more efficient and much more environmentally friendly.

Finally, the recession has eaten into oil demand. Less commerce means less industry and fewer trucks moving goods between states. Though there are signs the US economy is starting to rebound, economic growth is likely to remain weak, limiting oil demand in the world’s biggest oil-using nation.