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US OIL Renaissance : An Economic Boom

( From EIA, NZweek, MarketWatch, Ecointersect , AEI Ideas, EIA, EconMatters, Science Monitor, Haver, Motley Fool )​

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​​A New Era: Growing Economy with Lower Energy Prices ?



In fact, more supply than demand, even with a robust economy, because part of the reason the world economy will be doing so well is all the global enterprises out there producing oil. It’s a good business with very high margins when compared to many other industries with the past decade of higher prices.



Consequently, even if the US economy really takes off in 2013 as some have forecasted, don`t look for demand to overtake supply in the equation. The domestic oil renaissance means that we could have a booming economy, and still have more supply than we can use each day. Thus it is actually possible to have an era with a great economy, and even lower oil prices due to the domestic oil boom.

Expectations on Prices from EIA



​EIA projects the Brent crude oil spot price will fall from an average of $112 per barrel in 2012 to annual averages of $108 per barrel and $101 per barrel in 2013 and 2014, respectively, reflecting the increasing supply of liquid fuels from non-OPEC countries. After averaging $94 per barrel in 2012, the WTI crude oil price will average $94 per barrel in 2013 and $92 per barrel in 2014. By 2014, several pipeline projects from the mid-continent to the Gulf Coast refining centers are expected to come on line, reducing the cost of transporting crude oil to refiners, which is reflected in a drop in the price discount of WTI to Brent.

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Forecast from EIA

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​Abundant U.S. supply, low demand could cut dependence on liquid fuel imports

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U.S. net imports of petroleum and other liquid fuels as a share of product supplied (used as a proxy for consumption) have been one of the most watched indicators in national and global energy analyses. The Annual Energy Outlook 2013 includes a case in which net imports of liquid fuels are eliminated by 2035 under inherently speculative assumptions that boost supply and reduce demand relative to the previously published Reference case.



The Low/No Net Imports case simulates an environment in which U.S. energy production grows rapidly while domestic consumption of liquid fuels declines. The Low/No Net Imports case assumes that more petroleum can be recovered from tight oil formations as well as from offshore, Alaska, and gas-to-liquids sources than is considered achievable using current technology and known geology. Domestic crude oil production approaches 10 million barrels per day by 2020 and is sustained near or above that level through 2040.



In the Low/No Net Imports case, assumptions limit growth in demand for liquid fuels. Projected liquid fuels demand is assumed to be lowered by technological, economic, and behavioral factors including:



•Light-duty vehicle technology is improved

•Vehicle fuel efficiency standards are tightened beyond the 2025 model year

•Electric vehicle batteries are improved

•Natural gas market penetration into the freight transport industries is expanded

•Growth in vehicle miles traveled is significantly reduced relative to the Reference case

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The Situation

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​Based on EIA updates ( as of april 12 2013 ), here are some highlights of America’s amazing energy statistics :

1. The US produced an average of 7.208 million barrels of oil per day annualized on the week of april 12 2013, which was the highest average annual crude oil output since 1992 (see yellow line in chart below ). ​EIA expects U.S. crude oil production to continue to grow rapidly over the next two years, increasing from an average 6.4 million bbl/d in 2012 to average 7.3 million bbl/d in 2013 and 7.8 million bbl/d in 2014.

2. In 2012, several states set new production records for crude oil output, including North Dakota, New Mexico, and Colorado. Other states set multi-decade production highs for crude oil output including Oklahoma (highest since 1994), Texas (highest since 1989), Utah (highest since 1988), Wyoming (highest since 1999), and Kansas (highest since 1995).

3. In the four weeks ended April 12 2013, the U.S. imported less oil than we've imported in any period since the year 2000, a level we haven't seen consistently since 1996. It's a product of increased oil drilling across the U.S., and there's a demand aspect as well. Even as the economy has improved over the past three years, the amount of oil supplied to U.S. consumers has fallen.



​​​U.S. crude oil imports averaged 7.43 million barrels per day last week, down by 289 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged over 7.81 million barrels per day, 1.26 million barrels per day below the same four-week period last year, or 13.9% less...



​​As a result of the boom in shale oil production in the US, America produced domestically more than 60% of the oil it consumed last year, and net oil imports fell below 40% in 2012 for the first time since 1991, more than twenty years ago. Just seven years ago, it was exactly the opposite — America relied on foreign sources of oil for 60% of the oil consumed and produced only 40% domestically, before the oceans of unconventional oil were accessed using the breakthrough technologies of fracking and horizontal drilling.

4. Projected natural gas marketed production increases from 69.1 Bcf/d in 2012 to 69.3 Bcf/d in 2013, and 69.4 Bcf/d in 2014. Onshore production increases slightly over the forecast period, while federal Gulf of Mexico production declines.

5. As a result of natural gas production reaching an all-time high and oil production hitting a 17-year high last year, America was more energy self-sufficient in 2012 than in any year since 1991, more than 20 years ago (see bottom chart above). Last year, the US produced domestically 83.2% of the total energy consumed, which was the highest level of energy self-sufficiency since 1991, when the US produced a slightly higher 83.3% of the energy consumed.

Observe below the huge shift between petroleum consumption, US production and tumbling imports...

Oil and Gas Job Creation



​​Our first chart below puts the extractive industry employment in a broad perspective and indeed it certainly is up but in the context of absolute size is not all that impressive. For example, we’ll contrast that with real estate related employment which in 2006 amounted to about 10.5 mln jobs and from 2002 to 2006 represented about 40% of overall job creation.



​​So as per MoM gains to that on a 6-month moving-average basis natural resources and mining have created about 3.3k jobs per month, oil and gas specifically about 900 jobs per month and support functions about 200 jobs per month. But those jobs are well paid indeed, around 30$ an hour on average...

Support activities for oil and gas operations

ALL EMPLOYEES, THOUSANDS

Oil and gas extraction

​ALL EMPLOYEES, THOUSANDS

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