Booming US oil production may be just beginning

A new report says increases in shale output surpass official estimates and will soon make the country No. 1 in the world.

By Bruce Kennedy Jul 18, 2013 9:40AM

Jerry Myers, district manager for Kodiak Oil & Gas Corp., walks along a catwalk at the top of crude oil storage tanks in Watford City, North Dakota on Feb. 14, 2012 (© Daniel Acker/Bloomberg via Getty Images)The U.S. is at a historic crossroads when it comes to domestic oil production, which could surpass even some of the most optimistic forecasts.


In testimony this week before the Senate Committee on Energy and Natural Resources, Adam Sieminski, the head of the U.S. Energy Information Administration, reported domestic oil production was at 7.4 million barrels per day as of April -- its highest level since October 1992.


Leonardo Maugeri, a former senior executive at Italian oil giant Eni (ENI), is a fellow at the Belfer Center for Science and International Affairs at Harvard's Kennedy School of Government. Last month he issued a paper on the U.S. oil shale boom after analyzing data from more than 4,000 shale wells and from about 100 oil companies involved in shale oil exploration.


According to his findings, the U.S. may end up producing 5 million barrels of shale oil daily by 2017, becoming the world's largest oil producer as it churns out up to 16 million barrels of oil per day, including shale, conventional, liquefied natural gas and biofuels.


"The nature of shale oil production makes it particularly suited for the United States' industrial, financial, demographic, and geologic landscape," notes a Belfer Center policy brief on Maugeri's paper. "These same characteristics make the expansion of the shale phenomenon to other parts of the world improbable -- at least in the short term."


Indeed, Sieminski noted in his recent testimony that the rate of onshore oil production in the lower 48 states has been remarkable, rising to more than 2 million barrels a day, an increase of 64%, just between February 2010 and February 2013. During that period, Texas more than doubled its oil production, while North Dakota nearly tripled its output.


But Maugeri acknowledges that oil production will always depend on oil prices and that his forecast assumes the price will hold steady or perhaps decrease slightly. "If the oil price drops to below $65 per barrel," the brief says, "production could drop off substantially."


And, whether consciously or not, the brief's comparison of conventional and shale oil production seems to bring up questions about whether this boom in production is just that -- a boom, perhaps to be followed by a bust.


"Conventional oil production requires a high upfront cost, and wells have a long production life" of 30 years, it notes. "Shale oil is quick and relatively cheap to start up and has continual costs and a short production life (1 year). New wells come on line all the time and can be brought off line if the price of oil falls."


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492Comments
Jul 18, 2013 11:00AM
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Ok great, but why is the price of oil still $100+?  We need to get Wall Street out of the oil business.
Jul 18, 2013 10:59AM
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Who really cares? What does this do for the average Joe paying $4 a gallon for gas?  Will gas prices drop? Probably not, they will continue to rise as the oil companies deep pockets get deeper.
Jul 18, 2013 11:13AM
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Now all we need, is to build more refineries and stop the shipping from the medal east. Let them supply China and the rest of the world. 

Greed is the reason we pay so much at the pumps. And get the government to put more regulations on the oil companies. when it comes to pricing. 

Jul 18, 2013 11:54AM
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Only problem is, this oil boom won't help the american public by lowering gas prices, because the government will let them market and ship most of it overseas for a higher profit and continue to let the oil companies gouge the american people. I hold  the US government responsible because they permit all the gouging and price fixing perpetrated by all corporations not just gas and oil. They prop up farm prices to feed the world, we are paying higher prices for food at home so that we can feed the world at cheaper prices. Profits first folks and to damnation for the american people!!!!
Jul 18, 2013 12:48PM
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Highest production level since 1992.

You greedy bastards, at least get the prices back to 1992 level.

SOBs, I am paying $4.50, dont have money to buy food, just feeding the pumps, you SOBs

Jul 18, 2013 11:09AM
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Keep in mind people as you post comment after comment about the price per barrel and price per gallon of gas. OPEC has a lot more to do with the price per barrel of oil than Wall Street does. Not to mention you can have all the Supply in the world to feed a huge demand but if you have a limited refining capability you cant get that supply to the market.
Jul 18, 2013 11:30AM
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How about a $20.00 per barrel federal tax on extracted oil & similar products.  Because oil is traded on a global market the cost of oil won't increase it will just take money from the oil companies and give it to the government.  Oil trades at $100.00 a barrel because of the trouble in the middle east.  At 7.4 million barrels a day.  $20.00 a barrel would add about $54 billion in revenue for Uncle Sam.  Most other oil producing countries do this or something similar.

 

Part 2.   since we are producing so much oil we can start charging the middle east countries a security fee to keep our Military in the region.  Perhaps Japan, SO korea & Taiwan should help defray some military costs as well.

Jul 18, 2013 12:41PM
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SQUAWK SAYS PRICES ARE UP BECAUSE OF  SPECULATION ... OBAMA SAYS SPECULATORS WILL BE PUNISHED,, HAS ANYONE BEEN PUNISHED YET???
Jul 18, 2013 11:31AM
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OH my , what will the dirty Arabs do?
Jul 18, 2013 11:30AM
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We are a oil exporting nation now.  When they bring the plant on line to liquefy natural gas the boom will hit full stride.  I believe 14 are under construction now.   It has been adding a billion $ a day in new production to the economy for over a year.  It will not bring down the price of gas, but electricity cost should decrease.  It  will help with diesels priced as trucking switches to natural gas.
Jul 18, 2013 11:48AM
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We need to break OPEC by out producing them so they have little or no influence on pricing no matter what rhetoric they scream. The greed of Wall Street speculators that drive prices up or down needs to be addressed even if we have a huge supply they can still manipulate prices so they can make huge profits which ever way the prices goes. The sad part is that the people we have elected to office that are supposed to represent us are ALL in the pockets of big oil and wall street so we don't stand a snow balls chance in **ll to enjoy OUR recourses.
Jul 18, 2013 11:12AM
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Like anything is going to change. The way it is traded and manipulated will continue and big oil and politicians will continue to get rich.

 

The middle east runs the government so no matter what there will be an excuse why we can't and will not stop importing their oil for the sake of their economy and for the sacrifice of the American economy.

 

Things will never get better in this sold out country because if it was a factor to the government they would have already addressed the issues.

 

Oil brought us down and every time things pick up marginally it shoots up again. I guess they expect a different outcome. This country is DOOMED as far as middle class AMERICANS.

Jul 18, 2013 11:51AM
Jul 18, 2013 11:42AM
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It makes me sick to read this and the gas prices are continuing to rise.  I thought this would help the price our government needs to get it together the best fix to a bad economy is reducing cost of transporting goods.  High gas prices means continued government support of our economy.
Jul 18, 2013 1:02PM
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for someone that has been employed in oil patch for 30+ years, its about time we cut off countries that hate us so we can make a living on our own soil. remember all those oil company haters out there they employ hundreds of thousands of people out here. for your info companies such as google, apple, have far greater profit margins than oil companies and oh by the way their products are made from cheap child labor in other countries. where are all the do gooders, stupid yankees, california tree huggers, on that.
Jul 18, 2013 12:23PM
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Oil is a fungible commodity.  It doesn't matter where it comes from or where it is sold.  It should be sold at the price that the marketplace demands.  What an oil boom in the US does is provide jobs to oil workers and profits to those in the oil production business.  It will have very little to do with the price of oil at the pump in the US.

Jul 18, 2013 12:33PM
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I wish I could convey how upset I get when I read articles like these.  We, as a populace, pay at least 25% of our income to Social Security, Medicaid, et, etc.  Which is fine, IF, THEY, the corporation along with the government, give us something BACK!  How come I feel as though even if we have a ton of Shale Oil, we still won't get anything back as tax-paying citizens? 

Jul 18, 2013 11:21AM
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I think the larger picture needs to be looked at.  As production increases it is possible that the US will become a net exporter of oil.  Moving oil from one side of the balance sheet to the other will make a huge difference.

What does that mean for the average Joe?  I have no idea but it can't all be bad.

Jul 18, 2013 1:49PM
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If the government is to blame for the high price of oil and gas, you need look no further than your mirror to see who is really at fault.  The Constitution says that the People of the United States are are responsible for the government.  Congress had a 10% approval rating yet 90% of the incumbents won reelection.  The price of oil, and the farm subsidies to millionaire farmers will not change until we the people make it happen.  Vote out the incumbents for at least 3 cycles and you will see a change!
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