Carpe Diem

US oil output has increased 2M barrels/day in just 2 years to a ~24-year high; That’s like adding Brazil to the US oil supply

usoilThe Department of Energy reported today that US oil production for the week ending August 9 averaged 7.57 million barrels per day (bpd), which is the highest output of US crude oil in any week since the last week of November 1989, almost 24 years ago (see chart above). US oil production during the first week of August was higher than the same week a year ago by 22.5%.

Amazingly, in just the last two years oil production in “Saudi America” has increased by more than 2 million bpd (and by 36.2%), from 5.56 million bpd during the first week of August in 2011 to 7.57 million bpd last week, and has completely reversed a multi-decade decline in US oil output (see chart). It took more than 20 years for US oil output to gradually decline by 2 million bpd between 1989 and 2011, and then only 24 months to completely reverse that multi-decade decline with a 2 million bpd increase in oil output between August 2011 and August 2013.

With a continuation of the current, double-digit percentage increases in domestic crude oil production, it’s very likely that US oil output will exceed 8 million bpd by early next year (for the first time since the fall of 1988), and could possibly surpass 9 million bpd by the end of next year (for the first time since early 1986). Those estimates are consistent with the Department of Energy’s most recent upwardly revised forecast that US crude oil production will average 8.2 million bpd in 2014.

Bottom Line: As I reported last week, a 2 million bpd increase in US oil output in only 24 months to the highest level in nearly a quarter century, as a direct result of the dramatic increases in shale oil production made possible by the revolutionary, breakthrough drilling technologies of fracking and horizontal drilling, is an important energy milestone and has to be one of the most remarkable success stories in the history of US energy production. To put a 2 million barrel per day increase in US oil production into perspective, that would be like adding the entire daily oil output of Brazil (2 million bpd in 2012) to the US oil supply, and almost as much as adding the entire output of Venezuela (2.3 million bpd in 2012) to the US oil supply. That’s pretty amazing — thanks to advances in drilling technologies, it’s as if we’ve discovered all of Brazil’s vast energy resources right here in America, in places like North Dakota, Oklahoma, New Mexico, and Texas. Welcome to America’s shale revolution.

8 thoughts on “US oil output has increased 2M barrels/day in just 2 years to a ~24-year high; That’s like adding Brazil to the US oil supply

  1. How much of this production is based on a per barrel price 10x higher than in 1986 and 1998 – or 5x times higher than the summer of 2002 before we invaded Iraq -
    Nat Gas vs. electric vs. gasoline competition – so why is oil @ $105??

    • That my friend is one of the miracles of the free market. As real price goes up, there is more incentive to increase supply until the price drops again – or to supply alternate forms of energy for real cheap, like natural gas, which has never been cheaper (well at least two years ago).

      • Actually the price of natural gas today is $3.35 which is up from its low of $1.89 in 2012 but that was for 2 months, the average for 2012 was nearer 2.65. Note that in 2008 the average was nearer to $10 (wellhead price). So while the price is up from the bottom it is far closer to the bottom than the top.

  2. So will the next 2M barrels/day also happen that fast?

    Probably not. But if it did, we could remove tons of imports from the Middle East.

  3. The dramatic increases in production will not slow until the price of oil drops appreciably. They haven’t even touched the Permian Basin in Illinois yet, or countless other proven shale reserves.

    • Yes the limiting factor for oil is now drilling equipment. NG is slowing because of the low price and inability to move it to market.

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