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Energy facts of the day on America’s energy bonanza

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The Department of Energy’s Energy Information Administration (EIA) released updated data today in its “Monthly Energy Review,” here are several interesting highlights from the report:

1. The top chart above shows: a) US crude oil output (blue line) and b) US net oil imports (red line), both annually from 1990 to 2012.  Based on estimates for the last few months of 2012, the US produced crude oil at an average rate of 6.426 million barrels per day last year, which is the highest level of domestic crude oil output since 1997, fifteen years ago.  As previously reported on CD, the 2012 increase in US oil output was the largest annual increase in the history of the domestic oil industry back to the Civil War.

By December of last year, US oil output was approaching 7 million barrels per day (bpd), and has since surpassed the 7 million bpd level this month. Therefore, we can expect further gains in US oil output this year. The EIA is currently forecasting a 14% increase in US oil output in 2013 (following last year’s 13.7% gain), with an additional gain of 8.2% next year in 2014. That would bring domestic oil production in 2014 to an average of 8 million bpd for the year, and possibly to 8.5 million bpd by year-end. In that case, we would have a phenomenal turnaround in US oil output thanks to the recent breakthroughs in drilling technologies; in just a six-year period from 2008-2014, we could see increases in US oil output that will completely reverse a 22-year, and 41% decline in US oil output that started in the mid-1980s and ended when hydraulic fracturing revolutionized domestic oil output starting in about 2008.

As a direct result of the US shale oil boom bringing domestic production to a 15-year high last year, net oil imports fell to 40.6% last year, the lowest level in 21 years, going back to 1991 when net oil imports were 39.6%. As recently as 2005, the US relied on foreign sources for more than 60% of its oil, and produced less than 40% domestically. In just 7 years, those percentages have been completely reversed, and the US now produces almost 60% of the oil required to fuel the US economy, and relied on foreign sources last year for less than 41% of the oil consumed.

In another impressive turnaround, it took 14 years to go from net oil imports of 40% in 1991 to 60% in 2005, and then only five years to reverse that trend and go from 60% in 2005 back to 40% in 2012 – again because of hydraulic fracturing and shale oil.

2. Thanks to the energy revolution that has unleashed oceans of gas and oil trapped in shale rock, the US will produce domestically 83.4% of the total energy consumed in 2012, based on EIA data through October (see bottom chart). That brings America’s energy self-sufficiency to the highest level since 1990, when the US last produced that much of its own energy. Following a 14-year period from 1991 to 2005 when America’s self-sufficiency declined from 83% to 70%, it took only 7 years to reverse that decline, bringing America’s energy produced back to more than 83% of the energy its consumed last year.

Bottom Line: Today’s energy report from the EIA provides additional evidence of America’s booming energy revolution: US oil production reached a 15-year high in 2012 with a yearly increase that was the largest in history, net oil imports fell to a 21-year low, and US energy self-sufficiency rose to a 22-year high last year. Welcome to America’s shale revolution, it’s one of the best reasons to be optimistic about America’s energy and economic futures.

11 thoughts on “Energy facts of the day on America’s energy bonanza

  1. The EIA is currently forecasting a 14% increase in US oil output in 2013 (following last year’s 13.7% gain), with an additional gain of 8.2% next year in 2014….

    Is this the same EIA that had conventional depletion rates at 3.5% only to be forced to admit that the real figure was closer to 6.7%? The predictions of the EIA is about as accurate as those of Congress when it estimates future revenues and expenditures. I would rather look at the financials of the producers and see if the price at which marginal fields are unprofitable. In the case of shale, the producers need much higher gas and oil prices to be able to keep adding to their ample debt and be able to support their negative cash flows.

    What we are seeing is nothing new. There has always been the hope of some Ellis Wyatt type who could squeeze out useful oil out of rock at a low price. But no matter how much self-promoters like Aubrey McClendon tried to pretend to be like him, Mr. Wyatt has remained a fictional character and the dream has remained elusive. What you are doing is confusing production increases driven by capital destruction with wealth creation. They are not the same and when the accountants apply the proper depreciation costs to the process we will find that shale oil was not much better than shale gas.

    Of course, some people want to believe and promoters and charlatans will try to give them a nice story to facilitate that belief. And when the dream turns to a nightmare everyone will pretend that we could not have seen the bubble coming or argue that without fraud they never would have been fooled even though all of the accounting tricks and assumptions were clearly disclosed on the financial statements filed with the SEC.

  2. RE: “the US now produces almost 60% of the oil required to fuel the US economy, and relied on foreign sources last year for less than 41% of the oil consumed.”

    Does that reduction in percentage oil consumed from foreign sources have much to do with an overall reduction in consumption in this country?

    • <b?Does that reduction in percentage oil consumed from foreign sources have much to do with an overall reduction in consumption in this country?

      Yes, it does. Thanks to the contraction in real activity the US now uses around 12-13% less oil than it did in 2005. When you look at that decrease in demand and add the increase due to all of that new ‘investment’ in shale wells that do not seem to be self financing and you can see why the reporting is what it is. And will understand why so many supposedly intelligent people have a blind spot to obvious bubbles.

      http://gailtheactuary.files.wordpress.com/2012/04/recent-us-oil-consumption.png

        • Gail the Actuary is a complete nut. She is a Peak-Oil lunatic to such an extreme that she insists that the world of 2040 will be so poor that car ownership will be rare.

          Since when is the Peak-Oil theory lunacy?

          And given what the Fed and Congress are doing to the USD I think that the prediction that most Americans will have much lower purchasing power is a good one.

          And what exactly is the problem with the chart cited? Do you think that demand has actually gone up since 2005-2006? None of the numbers that I have looked at show anything different. Demand in the US fell off as the real economy slowed down. The real economy is still slowing and as the bond bubble bursts and interest rates head higher it is hard to make a case for good times for American savers.

    • Does that reduction in percentage oil consumed from foreign sources have much to do with an overall reduction in consumption in this country?

      Yes, it does. Thanks to the contraction in real activity the US now uses around 12-13% less oil than it did in 2005. When you look at that decrease in demand and add the increase due to all of that new ‘investment’ in shale wells that do not seem to be self financing and you can see why the reporting is what it is. And will understand why so many supposedly intelligent people have a blind spot to obvious bubbles.

      http://gailtheactuary.files.wordpress.com/2012/04/recent-us-oil-consumption.png

  3. I enjoy charts. Especially those charts that depict the inevitable demise of the phony, hoax-based, taxpayer supported, windmill and solar industries.

    Uneconomic, unreliable, inefficient and forever requiring taxpayer supports and bailouts means that today’s “renewable alternatives” will forever remain just that–alternatives.

    R.I.P. Green.

  4. While oil production is roaring ahead infrastructure is lagging seriously behind. Imagine the day when our socialist programs could be supported by exporting these resources. How about some pipelines or how about an export LNG terminal. Other countries are paying 4 to 5 times our production cost for natural gas. Even with shipping expenses there is still a healthy profit.
    The need for importing cleaner low sulfur feed stock like Brent or BLCO will continue as the demand for clean burning fuel will not disappear.

    • While oil production is roaring ahead infrastructure is lagging seriously behind. Imagine the day when our socialist programs could be supported by exporting these resources.

      You mean by socialist planning that creates infrastructure that cannot be justified?

      How about some pipelines or how about an export LNG terminal.

      How about them? The Bakken is very close to a peak. That means that any pipelines will outlive gas production and will have to be written down a lot faster than anticipated. And there is no way to support LNG terminals with shale gas production because it is far too expensive.

      Other countries are paying 4 to 5 times our production cost for natural gas. Even with shipping expenses there is still a healthy profit.

      Yes they are. But LNG terminals that have a ten year useful life will add a huge amount to the costs. So will the infrastructure that will outlive its usefulness. That is why exporting LNG will never happen unless your own demand collapses as your real economy contracts sharply.

      The need for importing cleaner low sulfur feed stock like Brent or BLCO will continue as the demand for clean burning fuel will not disappear.

      But the North Sea production is well past its peak. If you want Bent you have to line up with the other bidders. With real rates negative you will either get a collapse in the economy or a spike in oil prices. Either way the shale producers are screwed because their costs will not support the prices that they can get for their product.

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