A New American Oil Bonanza 

The United States now accounts for 10% of the world’s oil production. As it sharply curtails imports from countries like Angola and Nigeria, those producers are then compelled to sell their oil to China and other Asian markets at steep discounts, compounding the impact of American production on world markets.

Nowhere is the boom bigger than in Texas, home to two of three of the nation’s biggest shale-oil drilling frenzies. While oil rushes are nothing new to the state of J.R. Ewing and Spindletop, the new bonanza has doubled the state’s crude production over the last two years, suddenly making Texas a bigger producer than either Kuwait or Venezuela.

“Softening oil prices was inevitable,” said Sadad Ibrahim al-Husseini, former head of exploration and development at Saudi Aramco, referring to the increase in American output.”

Last summer, oil and gas prices rose for a time as President Obama considered an attack on Syria and disgruntled Libyan guards blocked major oil ports, but prices quickly retreated. Rising production in Iraq, Saudi Arabia, Canada and especially the United States served as a cushion.

Again prices began to rise this year in early June, as Islamic fighters advanced in Iraq and tensions rose in Ukraine. Prices began to retreat again just in time for the Fourth of July weekend.

In a recent report, the AAA auto club predicted that prices would continue to slide through the end of the summer unless a major hurricane hits Gulf of Mexico fields and refineries, or there are other unexpected refinery disruptions.

Dangers remain abroad, of course. The terrorist offensive in Iraq has not yet touched the country’s most productive southern oil fields and exports so far, although future production is in doubt with Western companies removing personnel for security reasons. Sanctions on Russia for its intervention in Ukraine may impede Western financing and technology for future drilling in the Arctic. And while several Libyan oil ports recently reopened, militia violence is escalating.

 

Source: nytimes

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