EIA: U.S. Oil Production Can Surpass Russia and Saudi Arabia Next Year
The United States will see domestic crude oil production rise to 11.8 million barrels per day (b/d) in 2019, according to the latest forecast from the Energy Information Administration (EIA). Overall, that would likely surpass leading global producers Saudi Arabia and Russia, who recorded average production levels of 10.5 and 10.1 million b/d, respectively, in 2017 according to EIA data. The forecast also noted that U.S. oil production hit 10.9 million b/d in June 2018, an all-time high.
While the Saudis have claimed to have an additional 2 million b/d of spare production capacity, several market analysts have raised doubts about whether or not the country can actually realistically add so much production into service over the course of the next year and a half. As one commodities analyst put it, “You cannot order 2 million barrels like order a coffee somewhere.”
That may be true in just about all places – except the U.S. shale patch, where development times for bringing new hydraulically fractured wells into production are as short as a month. Still not as fast as a cup of joe, but pretty darn close. With American drillers adding new production at a breakneck pace in fields across the country, the EIA’s assessment that the USA will see production rise to 11.8 million b/d is, effectively, a forecast of 2.5 million barrels being added since 2017, when we averaged 9.3 million b/d. EIA expects the U.S. to surpass the 12 mb/d threshold in the fourth quarter of 2019.
This rising production is yielding direct benefits for Americans. In the same forecast, the EIA assessed that gasoline prices have already peaked for the year, as increasing production will cause prices to decline for the rest of 2018, averaging $2.76 per gallon for the year. Furthermore, the EIA expects the continued increase in production to stabilize prices for drivers in 2019, estimating the average price of gasoline next year will be $2.77.
One of the biggest benefits of all that additional production will be a new level of energy security for our country. Long gone (but well remembered) are the days of near-total dependence on foreign supplied oil. The EIA estimates that total imports of crude oil “will fall from an annual average of 3.7 million b/d in 2017 to an average of 2.4 million b/d in 2018 and to an average of 1.6 million b/d in 2019, which would be the lowest level of net imports since 1958.”
That is an astounding accomplishment for the country, to finally be removing the economic shackles imposed by OPEC in prior decades. While the bloc is still an important factor for markets to consider, its vice-grip on the global energy industry has been broken by shale. American oil export growth is continuing this year, further countering OPEC. The United States began shipping a record 3 million b/d of crude at the end of last month, amounting to over a quarter of all U.S. oil production. “The U.S. in theory, by the early 2020s, assuming the shales retain their resilience, could be a net oil and oil product exporter. That’s incredible, actually,” Steven Kopits, managing director of Princeton Energy Advisors, told U.S. News & World Report, commenting on the EIA forecast.
Not only has the U.S. seen its oil production and exports rise, but exports of liquefied natural gas (LNG) are surging thanks to shale, vastly improving the country’s trade balance. In 2017, America was a net exporter of natural gas for the first time in 60 years, and the EIA only expects that trade surplus to grow as new export terminals become operational. The LNG export industry also provides plenty of economic benefits, such as an estimated creation of 450,000 jobs by 2040 and bolstering GDP. Some research has also pointed to climate benefits of expanded LNG trade, as natural gas exports can replace the use of dirtier fuels like coal among importing countries.
Overall, the latest EIA assessment is yet another strong indication that shale oil and gas will continue to improve the welfare of Americans far and wide. The industry’s pioneering efforts to use hydraulic fracturing and horizonal drilling techniques will sustain job growth, affordable energy, and improve economic conditions for all Americans over the next several years and beyond. By becoming the world’s leading provider of oil and gas, ahead of historically leading producers like Russia and Saudi Arabia, American trading partners worldwide can expect energy supplies to remain affordable, stable and abundant for decades to come.