Carpe Diem, Economics, Energy and the Environment

Texas oil reaches 3 million barrels per day milestone in May; as separate nation it would be world’s 8th largest oil producer

TexasThe Energy Information Administration (EIA) released new state crude oil production data yesterday for the month of May, and one of the highlights of that monthly report is that oil output in America’s No. 1 oil-producing state – Texas – continues its phenomenal, eye-popping rise. Here are some details of oil output in “Saudi Texas” for the month of May:

1. Oil drillers in Texas reached a new milestone in May, by producing more than 3 million barrels of crude oil every day (bpd) during the month of May, which is the highest daily oil output in the Lone Star State in any single month since at least January 1981, when the EIA started reporting each state’s monthly oil production (see chart above). Texas reached the two million barrel per day oil production milestone in August 2012, and has since added a million more barrels of daily oil production in less than two years to reach the three million barrel milestone in May of this year. Compared to a year ago, oil output in Texas increased by 21.2% in May marking the 37th straight month starting in May 2011 that the state’s oil output has increased by more than 20% on a year-over-year basis.

2. Remarkably, oil production in the Lone Star State has more than doubled in less than three years, from 1.496 million bpd in August 2011 to 3.01 million bpd in May of this year (see chart above), and that production surge has to be one of the most significant increases in oil output ever recorded in the US over such a short period of time. A 1.51 million bpd increase in oil output in only 33 months in one US state is remarkable, and would have never been possible without the revolutionary drilling techniques that just recently started accessing vast oceans of Texas shale oil in the Eagle Ford Shale and Permian Basin oil fields. As I reported recently, both the Eagle Ford and Permian Basin oil fields in Texas are now producing crude oil at a rate of more than 1 million bpd, joining an elite international group of only ten super-giant oil fields that have ever produced that much oil at their peak.

3. The exponential increase in Texas oil output over roughly the last three years has completely reversed the previous, gradual 28-year decline in the state’s conventional oil production that took place from 1981 to 2009 (see arrows in chart) – thanks almost exclusively to the dramatic increases in the state’s output of newly accessible, unconventional shale oil.

4. As recently as mid-2009, Texas was producing less than 20% of America’s domestic crude oil. The recent gusher of unconventional oil being produced in the Eagle Ford Shale and Permian Basin oil fields of Texas, thanks to breakthrough drilling and extraction technologies, has recently pushed the Lone Star State’s share of domestic crude oil above 30% in each of the last 20 months, and all the way up to more than 36% of America’s crude output in May.

5. Oil output has increased so significantly in Texas in recent years that if the state was were considered as a separate oil-producing country, Texas would have been the 8th largest oil-producing nation in the world for crude oil output in March (most recent month available for international oil production data) at 2.93 million bpd – behind No. 7 Iran at 3.23 million bpd.

6. The dramatic increase in Texas’s oil production is bringing jobs and economic prosperity to the state. For example, over the last 12 months through May, payrolls in the state of Texas increased by 371,000 jobs, which was a 3.3% annual increase in the state’s employment level, almost double the 1.8% increase in total US payrolls over that period. Every business day over the last year, more than 1,400 new jobs were created in the Lone Star State, and many of those jobs were directly or indirectly related to the state’s booming energy sector, which experienced a 8.1% increase in payrolls for oil and gas extraction jobs (8,450 new jobs) over the most recent 12-month period through May. Oil and gas companies in Texas hired more than 32 new employees every business day over the last year just for extraction activities, or more than 4 new hires every hour!

MP: The significant increase in Texas’s oil production over the last several years is nothing short of phenomenal, and is a direct result of America’s “petropreneurs” who developed game-changing drilling technologies that have now revolutionized the nation’s production of shale oil. Thanks to those revolutionary technologies, Texas is now home to two of only ten super-giant oil fields to ever produce more than 1 million barrels of oil per day – the Eagle Ford and Permian Basin.

For oil output in Texas to increase from 2 million to 3 million bpd in less than two years, and increase so dramatically that the state produced more than one-third of all US crude oil in each of the last 15 months (and more than 36% of US oil in May), is undoubtedly one of the most remarkable energy success stories in US history – and it’s just getting started. At the current pace of annual increases of about 25%, Texas oil production will likely surpass 4 million bpd by late summer of next year. With those projected increases in Texas oil output, the state could soon surpass Iraq, Iran and even Canada to move up in the international oil production rankings to become the world’s No. 5 oil producer in 2015.

“Saudi Texas” continues to be the shining star of The Great American Energy Boom.

18 thoughts on “Texas oil reaches 3 million barrels per day milestone in May; as separate nation it would be world’s 8th largest oil producer

  1. 5. “…if the state was considered…”

    Hypothetical clauses always use the plural past tense. In the case, the correct phrasing would be: “…if the state were considered…”.

  2. I realize that the oil business is unique.

    But still, these stats tell me that the defeatists, the slow-growthers, those who say the American economy cannot grow more quickly are wrong.

    If there is money to be made, the free enterprise system will expand to meet demand. It is that simple.

    The price signal works.

  3. When most people hear the word “production”, they think something is being created. Since in fact no significant subterranean oil has been created for millions of years, it would be more accurate to replace “production” throughout with “extraction”. The article might sound less jubilant if it made clear that the boom isn’t in how fast oil is created, but in how fast we can use it up.

    • @Stephen Bloch
      > in fact no significant subterranean oil has been created for millions of years

      …Then it’s interesting that no one was burning it millions of years ago. I suggest you read The Battle for Barrels – Peak Oil Myths & World Oil Futures:

      “Let us conclude this survey of economists’ critiques of Peak Oil theory with one written several decades before that theory was even born. Writing as long ago as 1933, Erich Zimmermann (1888–1961) advanced the functional theory of resources to make many salient points. In place of resource fixity, Zimmermann suggested that man acts on resources to make appraisal as a means to extract supply. Resources are dynamic, they become, and evolve out of the triune of nature, man and culture within which nature sets the outer boundary limits, while knowledge is the mother of all realised resources. Presciently, Zimmermann drew attention to the vast gulf in views between physical scientists and economists on resource questions. The former seek comfort in a proximate concrete reality and work with mindsets that emphasise the absolute, static and one-dimensional – all, according to Zimmermann, at variance with the real world. Since then the shift in focus in neoclassical economics towards econometrics and a pseudo-bounded universe, combined with the professional desire for “hard” mathematical relationships, has tended to obscure this set of astute observations found in economics many decades ago. Across the gap of more than three-quarters of a century, Zimmermann’s observations hit home hard.”

      • Sure, “realized oil” is a resource subject to technological improvements. But it’s bounded by “actual oil”, an absolute resource on which, as Zimmermann acknowledges, “Nature sets the outer boundary limits.”

        If your bank raises the daily limit on ATM withdrawals, it allows you to feel rich for a little while, but it doesn’t avoid the problem of running out of assets — indeed, it enables you to run out of assets even sooner. That’s the way we should view oil-extraction technology. Newspeak terms like “production” that actually means “consumption” are an attempt to hide this fact.

        • ” That’s the way we should view oil-extraction technology. Newspeak terms like “production” that actually means “consumption” are an attempt to hide this fact.”

          It’s production.

          The oil is extracted into vessels for future consumption. Crude sits in the ground until being able to be forced out of its confines by systematic methods of production.

          Refining crude into various end products makes it consumable.

          Nothing hidden nor new spoken in the lexicon of audacious Texas oil producers.

          • @Citizen Buddy
            > Refining crude into various end products makes it consumable.

            True. I don’t know too many people who run crude oil in their cars. There was that one guy on Doomsday Preppers, though, who had a flex-fuel military-surplus vehicle that could run on used motor oil. I think that case could be called a rare exception, though.

    • Why does Dr. Perry need to address the economics of fracked wells in his posts? And why is it a failure if he does not? Just because you say it is a failure?

      He is discussing production growth and total production. His points are all valid. The economics of fracking was not the point of his post.

      • Simply put, U.S. oil and gas independence is a long-term and not a short-term issue. There is little point in discussing near-term oil production success – implying the U.S. is on its way to oil independence – without discussing the economics of fracking.

        Neither my first post nor this one are intended to be argumentative. I invited Dr. Perry to explain the economics of tight-oil fracked wells in order to understand whether he is satisfied his current enthusiasm will carry through for the long-term.

        Moreover, I can’t imagine Dr. Perry needs defenders. I am hoping by his response to my question to learn something about tight-oil fracked wells I currently don’t know.

  4. This post is an almost word for word repeat of a post from June 27. The real story here is that the EIA recently revised the Texas oil estimates for all previous months sharply downward. That is a sign that things in Texas are beginning to slow down.

    • Michael, I think you are wrong in your use of the words ” EIA recently revised the Texas oil estimates for all previous months sharply downward.”

      Please show evidence that all previous months were revised sharply downward.

      A few months from late last winter/early spring may have been revised downward, because of severe ice storms in Texas impacting equipment and crews.

      The overall trend continues to be strongly growing production.

  5. >>>>Moreover, I can’t imagine Dr. Perry needs defenders. I am hoping by his response to my question to learn something about tight-oil fracked wells I currently don’t know.<<<<

    Not to defend Dr. Perry-but I would say that there are better places to learn about individual well economics. His focus seems to be on the bigger picture. Google "Million Dollar Way"-this is a Bakken Blog that touches on individual wells. Another place might be "Sogis.tx.blogspot.com" Anyway a couple of places to start.

    • Breaker Morant: Thanks very much for the two references you provided. I will read both with interest.

      That said, consider that big picture comments can be misleading if they prove not to be backed by solid underlying facts.

      Dr. Perry may well have underlying economic support for his “big picture comment”, and in my view “implication of things to come” on and from Texas tight oil production. If so, I am very interested in learning his thoughts and understanding his analysis.

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