U.S. May Achieve Energy Independence This Decade, Citigroup Says

[jpak]

http://www.bloomberg.com/news/2012-02-15/u-s-may-achieve-energy-independence-this-decade-citigroup-says.html

The U.S. may achieve energy independence this decade because of growing North American oil production from shale formations, according to Citigroup Inc. (C)

U.S. shale oil output will grow by 2 million barrels a day as California production increases by 1 million and U.S. Gulf of Mexico output gains 2 million barrels, Seth Kleinman, global head of energy strategy at Citigroup Inc. in London, said in a report today. Foreign imports will drop to 3 million barrels a day, according to the forecast.

“U.S. oil production is rising fast, and net imports of oil are falling sharply,” Kleinman said in the report. Net U.S. oil and product imports are about 8 million barrels a day now, he said.

Canadian production is expected to rise by 1.6 million barrels by 2020, according to the report, which cited the Canadian Association of Petroleum Producers.

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[FBaggins]

1. Somewhat optomistic, but not as much so as many will assume.

But even if it's "only" closing the gap (through increased production and decreased demand) to 2-3 million bpd (a number that could at least be met here in N. America)... that would be quite an achievement.

Interesting to note that this estimate implies a new US peak in production. Bound to spark some commentary.

An economic lesson might be that absolute/relative advantage should only drive free trade until you reach the point that your people are dying protecting their production and they (OPEC) artificially drive the price beyond any reasonable savings implied by their lower cost of production (IOW, the market is in no sense "free&quot . Much of OPEC learned this lesson in the 80s when they kept prices high for so long that much of the world decided it was a good idea to develop their own. That group was in the minority this time.

[dixiegrrrrl]

2. Except US is planning to EXPORT most of that production,

I have read.

Really, is Citibank a source of honest info???

[FBaggins]

3. Not that it would matter.

It doesn't make much difference whether you produce 10 units of a thing and consume it in the country vs. producing those 10 units for export while importing the same amount. Either way, your trade deficit shrinks and GDP improves. It would only happen where it's cheaper to ship it out than to import foreign supplies to a particular part of the country - as, for instance, with Alaskan oil heading to Japan offset by imports from Mexico to refineries along the Gulf coast (more cost-efficient than shipping Alaskan oil to the Gulf coast).

You may be thinking of natural gas... which already has a surplus of production but limited ability to export it. It's expected that production will increase as export facilities are built.

[joshcryer]

7. Yeah, it doesn't matter that much, except, the BLM leases are like $5 an acre.

And the oil sharing revenue contracts are some ridiculous 1% or something like that.

If we're going to rape public lands at least freaking pay the citizens 50% of the profits!

OPEC, national oil markets, etc, won't feel it in the least. The companies would, the CEOs would, the investors might, but overall it doesn't matter if it's "half nationalized" or not.

[OnlinePoker]

4. I don't know whose statistics to trust

I looked at the historical figures on the EIA website. For the November 2011 monthly imports, one page says imports were 335 million barrels (11 mbpd, not the 8 million in the article):

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTTIMUS1&f=M

but another on the same site says imports were 265 million barrels (8.8 mbpd)

http://www.eia.gov/dnav/pet/PET_SUM_SND_A_EPC0_MBBL_M_CUR.htm

In any event, imports have declined, but they have remained steady for 3 years. I think this has more to do with the recession than a massive rise in production and expect that whenever the economy starts a real recovery you'll see this number climb again. I seriously don't know why he is including anything about Canadian production rising over the next 8 years. This would still be imported oil (unless the U.S. is claiming manifest destiny over Canada's oil patch, part of which is now owned by the Chinese and a reason Harper is so keen to build the Northern Gateway Pipeline). How is still having to import 3 million barrels a day considered "independence" (that's $109 Billion leaving the country at $100/barrel)?

By the way, production has only gone up by about 1 million bpd since the low in 2005.

[FBaggins]

5. The first figure is imports of crude AND petroleum products.

The second figure is just crude.

Note that the US is now a net exporter of petroleum products... so that gap isn't important in this case.

By the way, production has only gone up by about 1 million bpd since the low in 2005.

That's because new extraction techniques have only just started to benefit oil production. It's a few years behind the natural gas production gains.

How is still having to import 3 million barrels a day considered "independence"?

I think the estimate is for 5 million bpd of additional production and 3 million bpd of reduced demand.

[joshcryer]

6. US Oil Shale exploitation is going to rape hundreds of thousands of square miles...

...or pristine federal land.

It is a goddamn tragedy.

And it was the long term strategic goal though I can't prove it. Capitalism just works that way.

[NickB79]

8. What does Canadian oil production have to to with US energy independence?

Unless one considers Canada part of the US

On top of that, I've read reports suggesting Canadian tar sands production will hit limits due to water supply constraints before they hit their expected oil production.

[Viking12]

9. Pass that bong over here...