Today’s US jobs report was disappointing, and points to an economy that is still struggling.
What about the oil sector? Politicians complain about the slow issuing of drilling permits in the Gulf of Mexico in the wake of BP’s Macondo well disaster, and the Oil Lobby is pushing hard for the federal government to open up new domestic areas for drilling in the Gulf, off the East Coast, and in Alaska.
Is oil production down?
Far from it. Between 2008 and the end of 2010, domestic crude oil production rose more than 11% and production of natural gas liquids (NGLs) grew by more than 12%. The increase in US production made up for about half of the decline in petroleum imports (1.7 million barrels per day) over this time period. Of this production, about 94% was delivered not by Big Oil, but by many independent oil and gas producers (such as Energen, Linn Energy, NGAS Resources, and Questar).
In 2010 domestically produced oil and NGLs hit 7.5 million barrels per day, the highest output in eight years. The increase in production led to a reduction of net imports of crude oil and NGLs to 9.4 million barrels per day, the lowest figure in 13 years. According to the Independent Petroleum Association of America (IPAA) without this increase in domestic production, the US oil import bill in 2010 would have been $20 billion higher (calculated at 2010 average price levels).
2011 has picked up where 2010 left off. According to the Baker Hughes Rig Report, there were 1,886 drilling rigs in operation across the US in early July 2011, up 329 from early July in the previous year.
A report by Credit Suisse analysts in March forecasted that the US will be producing an additional 2.5 million barrels per day by 2016, based on the development of new onshore fields (such as the Bakken shale in North Dakota and the Eagle Ford shale in Texas) and deepwater projects in the Gulf of Mexico.
Despite restrictions on opening up exploration areas in the Outer Continental Shelf, if oil prices stay high and the anti-fracking forces don’t stymie their drilling activities then it will continue to be Drill Baby Drill time for US oil independents, and foreign imports will continue to fall.