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Page added on March 13, 2016
The US Is Pumping All This Oil, So Where Are The Benefits?
The U.S. has ramped up oil production so dramatically that it’s joined Saudi Arabia and Russia as one of the world’s largest producers. Just glance at the chart below.
Since this surge began in 2008, American production rocketed from 5 million barrels a day to nearly 10 million barrels a day at the high point last year.
More importantly, oil analysts confidently predicted that a tide of benefits would flow as freely as the oil now coming out of the ground.
First, the U.S. economy would get a boost that would include a renaissance in manufacturing. Second, the U.S. would be far less dependent on the vagaries of foreign energy producers. And third, America could shrink its footprint in the volatile Middle East.
Yet none of this has happened. Why not?
Forecast No. 1: An Economic Boost
The boom, fueled by shale oil fields in places like North Dakota, was supposed to turbo-charge the economy. Energy would be abundant and cheap. Consumers would have more money to spend on other stuff.
And that’s all true. You see it in places like convenience stores. When it costs drivers less to fill up the tank, they buy more soda. Good for Coke. Good for Pepsi.
But many forecasters failed to see the other side of the equation. More American companies and workers are now linked directly or indirectly to the oil industry, and they get hurt when prices go down.
“Actually, oil has become more important to the U.S. economy because of this almost doubling of U.S. oil production,” said Daniel Yergin, the author of best-selling books on the industry, including The Prize and The Quest.
Americans used to worry only about high oil prices, he noted. But now the country needs to consider what happens when prices go down.
“You have people working all across the United States that are in effect part of the supply chains. So when the oil price goes down, and companies cut spending, this reverberates in Illinois, Ohio and many other states,” said Yergin, who is vice chairman of the economics firm IHS.
The U.S. economy has grown steadily since the 2008-2009 recession. But that growth has been modest compared to previous recoveries. Since oil prices crashed in the summer of 2014, going from more than $100 a barrel to around $30 today, the economy has continued at roughly the same pace.
So what’s the overall impact of cheap oil? Yergin describes it as a “titter-totter.” Some gains here, some losses there, but overall, pretty neutral.
Forecast No. 2: Energy Independence
U.S. imports have dropped dramatically, but this really hasn’t set the U.S. free in the ways anticipated.
All this new American oil contributes to the current worldwide glut and the low prices. And neither the U.S. nor any other country wants to be the one that cuts back and sacrifices its own production for the greater good.
“Someone has to cry uncle,” says oil analyst Steve LeVine, who writes for Quartz and teaches at Georgetown University. “The conventional wisdom is that American shale oil producers will be the ones. And they are in trouble.”
The reason is cost. Saudi Arabia and other low-cost producers still make a profit when oil is $30 a barrel. Much of the U.S. production is relatively high-cost, and many companies are losing money at the current price.
Every day, world production of oil exceeds demand by more than 1 million barrels. Many countries are running low on places to store the excess.
In the U.S., that place is Cushing, Oklahoma, home of huge and rapidly filling storage tanks, LeVine says.
Some 500 million barrels of oil are in storage around the world, says LeVine.
“That’s the largest volume in storage since the Great Depression,” he notes, adding that some forecasters are predicting that if storage runs out, oil could go below $20 a barrel.
Forecast No. 3: U.S. Pulls Back In The Middle East
Forecasters also argued that more U.S. oil would mean a reduced American need to resolve conflicts in the Middle East. Oil was, after all, the main reason the U.S. was drawn into the region decades ago.
But here’s the catch: Cheap oil can destabilize Middle Eastern countries that depend almost entirely on oil revenue.
Consider Iraq. It’s desperately short of cash as it fights the Islamic State and tries to stay current on salaries to millions of government workers.
President Obama pledged to end the wars in Iraq and Afghanistan, and he has withdrawn the large contingents of U.S. large ground forces. Yet in Obama’s final year in office, the U.S. is still engaged in three regional wars — Iraq, Afghanistan and Syria — and dealing with instability throughout the region.
All the forecasts looked at the potential upside of more American oil, but never fully factored in the downside.
21 Comments on "The US Is Pumping All This Oil, So Where Are The Benefits?"
Outcast_Searcher on Sun, 13th Mar 2016 7:48 pm
OTOH, no matter how much you’re in denial, fracking (which explains the massive increase in US oil production) has produced a great increase and price drop in each of the drill bit hydrocarbons: natural gas, NGL’s, and crude oil. (Source: Book: “The Domino Effect” by Russell Braziel).
Since the US has at least a 10 year advantage over the rest of the world in terms of becoming proficient in consistently fracking for good results )source, same book, “The Domino Effect”, this results in a big advantage for the US.
As time goes on, allowing oil drillers to adapt, the net benefit to the US consumer becomes more and more apparent. After all, the big economic damage to a rapid oil price drop to the producers becomes apparent rapidly. If prices remain low, consumers reap the benefits month after month (and perhaps, year after year). And if prices spring back rapidly, obviously that’s good for the oil producers again.
But feel free to deny this. It’s what doomers do.
Apneaman on Sun, 13th Mar 2016 7:57 pm
Outcast, still trying to pawn off rusty as a objective analyst? What the fuck else is he going to say besides industry cheerleading? Nothing unless he’s looking for a new career.
Rusty Braziel
Position:
Braziel is President & Principal Energy Markets Consultant for RBN Energy. RBN provides energy market advisory services specializing in strategy, acquisitions and divestures. The company works with companies engaged in trading, marketing or purchasing of energy commodities, purchase and sale of energy related assets and E&P for oil and gas.
Industry:
Rusty focuses on hydrocarbon markets, primarily natural gas, natural gas liquids and crude oil. His expertise is primarily in the production, transportation, storage and demand for physical energy commodities, and the impact of physical market developments on price.
Location:
Houston, TX
Education:
M.B.A. Stephen F. Austin State University, Nacogdoches, Texas Emphasis: Finance, Quantitative Management Techniques B.B.A. Stephen F. Austin State University, Nacogdoches, Texas
Major: Finance/General Business
https://rbnenergy.com/rusty-braziel
Oh Rusty, you’re so dreamy…. you give a girl the vapors.
Yours faithfully, Outcast_Searcher XOXO BFF 😉
makati1 on Sun, 13th Mar 2016 8:09 pm
“All the (Imperial) forecasts (propaganda) looked at the potential upside of more American oil, but never fully factored in the downside (because the truth would be devastating).”
There, I fixed that last sentence. The truth is very elusive and rare in America these days.
Boat on Sun, 13th Mar 2016 8:43 pm
mak,
So when MSM projects bad news are they wrong? In your world it simply doesn’t matter what is reported. They can’t be truthful.
Pennsyguy on Sun, 13th Mar 2016 9:05 pm
‘Right again Mak! I often think that I hear Orwell laughing–or moaning–from the grave. The winners write the history books and the powerful define what is true.
Truth Has A Liberal Bias on Sun, 13th Mar 2016 11:00 pm
The price came down pretty good. For consumers not employed or invested in oil it’s been a great benefit. Duh.
Anonymous on Mon, 14th Mar 2016 2:58 am
How can subsidized oil, whose price is being artificially(and temporarily) suppressed, supposed to help the americant empire and its slave-consumers? How is this supposed to work exactly? The amount of raw materials and energy the uS steals from the rest of the planet, is leveling off. The population keeps rising, and debt for almost everyone, except the super-wealthy of course, are already beyond sustainable levels. Whatever ‘benefits’ cheap(ish) oil are supposed to be delivering are all being offset, and then some, by onerous debt, declining real wages, and the ever increasing demands of the american war-terror-surveillance state.
If cheap oil means big oil cant afford to try to find more ‘cheap’ oil for fat americans to waste, then what? If expensive oil means no one can afford to burn it quite so wastefully and frivolously as americants demand, well then what again?
At some point, it will sink in the problem isnt expensive oil, or cheap oil, but a way of life that cant be sustained no matter what the ‘cost’ of a gallon of lead-saturated made-in-the-uS of frakn gazoleen is. But the dullards of the homeland are so poorly educated and informed, they will never see it. What they will do is blame the usual suspects. The gov’t(justified actually), big oil (also justified), environmentalists, terrorists, anyone that looks even vaguely arabic. And even if gas was 25cents a gallon, virtually all the problems the uS created for itself, would remain almost totally un-resolved.
makati1 on Mon, 14th Mar 2016 6:28 am
Boat, propaganda is the rule these days, not the exception. No American MSM sources ever project news that is negative to the US. You have to go to the independent internet sources to get a real perspective on current events. You will never get it from America, deceptionalist country.
Deception:
Synonym Discussion of deception –
deception, fraud, double-dealing, subterfuge, trickery mean the acts or practices of one who deliberately deceives. deception may or may not imply blameworthiness, since it may suggest cheating or merely tactical resource . fraud always implies guilt and often criminality in act or practice . double-dealing suggests treachery or at least action contrary to a professed attitude . subterfuge suggests the adoption of a stratagem or the telling of a lie in order to escape guilt or to gain an end . trickery implies ingenious acts intended to dupe or cheat .
Perfect description of the US MSM Iron Curtain.
rockman on Mon, 14th Mar 2016 6:31 am
“First, the U.S. economy would get a boost that would include a renaissance in manufacturing”. Of course: nothing will boost an economy as well as the 300% increase in the price of oil that led to the US shale boom. LOL. “Energy would be abundant and cheap.” Cheap? That must have been offered by someone with an IQ similar to the author of this crap. “…but this really hasn’t set the U.S. free in the ways anticipated.” Free at last, free at last. Thank Dog, free at least! I think someone must have misinterpreted Dr. King’s message.
“If prices remain low, consumers reap the benefits month after month (and perhaps, year after year).” And what did the US consumer pay for this benefit? Since 2008 when the price of oil increased enough to ignite the US production surge our consumers have paid about $2.5 TRILLION MORE FOR THE OIL THEY BOUGHT then they would have if oil prices had not increased. Yes: great to be back paying for oil what we were before the expensive production surge. But it’s difficult to see the benefit of spending $TRILLIONS more for oil and then getting back to the prices we had 10 years ago.
“The price came down pretty good. For consumers not employed or invested in oil it’s been a great benefit”. That’s great for the currently unemployed. How did that work out for the many tens of millions unemployed when oil was $90+/bbl? I suspect they have a rather different perspective. LOL.
Life is really f*cking simple when you carve out a short period of time and view it in a vacuum. LOL.
Practicalmaina on Mon, 14th Mar 2016 8:14 am
Boat giving shit about selectively reading and believing something is ironic. I have given him a half dozen articles to proven him wrong after he says something idiotic and he ignores them. Because according to MSM none of their sponsors ever chose profits over humanity.
Practicalmaina on Mon, 14th Mar 2016 8:17 am
Mak we are not the only deception a list country though. If you think about foreign intelligence ect. They on some level must know the shit is coming down the road from climate change. So why encourage the build up of fossil fuel dependence in the 3rd world.
shortonoil on Mon, 14th Mar 2016 8:33 am
You sort through what remains to find the last unbroken potato chip in the bottom of the bag. Most of what there is crushed, bits and pieces, because everyone kept looking for the best one that was left. And so it is also with oil!
For a hundred and fifty years everyone kept looking for the best one left in the bag. What remained is called LTO; a light hydrocarbon with an API often greater than 45. The reason it is light is because it comes from deep source rock, where temperatures and pressures are high. The thick, low viscosity oil, got cooked down into lighter fractions.
Those lighter fractions got a lot of their C7+ molecules broken down into smaller ones. The C7+ molecules are what is needed to make fuels. It takes fuels to power an economy:
http://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/images/eneene/sources/petpet/images/refraf1-lrgr-eng.png
It takes fuels to power an economy because fuels supply the energy needed to make things move. Nothing moves without energy. Hydrocarbons that don’t make fuels don’t move very much of anything, and if things aren’t moving there is not much of an economy.
The US had a renaissance in hydrocarbon production; it produced a lot of Shale which is a lot of very light hydrocarbons. It is not very good at making things move. Pour the last few bits and pieces from the bottom of the bag into your hand, and try to mix them with a little guacamole; your potato chip economy is not doing very well!
http://www.thehillsgroup.org/
makati1 on Mon, 14th Mar 2016 8:50 am
Prsctical, if you think the 3rd world would not like a few of the energy perks you have enjoyed all of your life, you need to get out more. The US has been feeding bullshit to the 3rd world since at least WW2 about how great it is. Movies, mags, books, TV, etc.
And how many on the 3rd world even realize what is happening? Not many. Most are just trying to get the necessities, not the luxuries. For instance, the Ps uses 1/20th the energy that the US uses per capita. Many do not even have electric in their homes or a bank account or even a regular income. Do you think they give a damn about the price of oil, climate change, or the economy?
The 3rd world also has it’s elite who DO know what is happening but are greedy and want all they can get before the end. The only difference is that the rural peasants will hardly notice the change. The elite will, as will most of the 1st world, and especially the United States of Chaos.
eugene on Mon, 14th Mar 2016 8:52 am
Agree with shortonoil. In addition, most of the created jobs were low paying service jobs. If you’re on the bottom of the economy, you need the extra money just to make it. And many Americans are deeply in debt.
marmico on Mon, 14th Mar 2016 9:09 am
What a fuctard.
Will you go away permanently when the “magical maximum wet dream ETP” consumer price is exceeded?
Or concurrently does everyone get to roll on the floor laughing their ass off at your 2005 fuctardedness.
Practicalmaina on Mon, 14th Mar 2016 9:21 am
Makati, I get the desire for an easier life on the individual level. But most of these people are working and struggling too much to think about global warming and resource constraints and how they should stick with their mopeds instead of getting a larger ice. All they know is the pollution they see which they know they are a tiny factor in.
I am talking about the leadership, China is usually frugal and calculated, so why encourage people to buy cars that are going to result in losing money in trade for oil. They have huge populations in low areas, hell they are building bases in the ocean, sea level rise comprises this. I guess I cannot be that suprised seeing how pro BAU, big buisness and pollution Obama has been threw much of his time.
Practicalmaina on Mon, 14th Mar 2016 9:28 am
Good thing I am on the bottom of society in the US I guess :). It’s like the article on eating bugs, my state makes bank selling what were once reserved for prisoners, and were considered underwater cochraoches. If only land bugs tasted like lobsters, I think the damage from industrial farming would dissappear rather quickly.
peakyeast on Mon, 14th Mar 2016 11:56 am
Practical: Lobster is beetle – I think maybe not too many adventurous cooks has tried cooking with land-beetles to the same extenth that sea-beetles has been tried. And possibly the larger land-beetles has already been put on the U.N. “kill list” of earth life – like so many others..
Thus the culinaric aptitude and taste of land-beetles could be on par or even exceed the experience of sea-beetles.
shortonoil on Mon, 14th Mar 2016 12:13 pm
“In addition, most of the created jobs were low paying service jobs.”
To see how the economy is really doing, watch state sales taxes. It is the one place where economists can not fudge the numbers. 2016 tax receipts are going to look pretty bad, like depressing; because depression is were this is going.
makati1 on Mon, 14th Mar 2016 8:50 pm
Practical, China is forced to compete or become another servant of the West(US). It is the goal of every leader to try to lift his people out of poverty. I think China knows it’s only hope at freedom from the Empire is to build a bigger, better military and resource base and that takes a huge financial base.
China is waging war in ways not recognized by most here. What would happen if all exports from China ended today? I bet you have no idea either, but you would know in a few days when you went to the store and most of the shelves were empty.
How about if they dumped all of their USBs and USTs on the market today? You can see the ability they have to swing the markets from day to day. Maybe they plan to crash it?
Do you realize that there are about 4,000,000 Chinese living in the Us today? Every large city has their Chinatown section. How many are spies? Future saboteurs? If a war broke out between the US and China, who would win? I would not bet on the Us.
Davy on Mon, 14th Mar 2016 9:07 pm
China is getting started with waging war on itself:
http://www.zerohedge.com/news/2016-03-14/thousands-angry-unemployed-chinese-coal-miners-take-streets-police-break-enormous-cr