Oil Trends Blog

Contrary to the conventional wisdom espoused by the Cheney oil group, there is new evidence that the U.S. is not in as dire straights as they would have you believe.

New information from the Energy Information Administration is now supporting views expressed by Oil Trends Blog in earlier publications. EIA is predicting U.S. crude oil production will increase 8 percent from 2008 to 2009. The following graph illustrates this fact:

Two thirds of the overall U.S. increase in production in 2009 will come from the Gulf of Mexico. Some of this increase reflects recovery from this year’s hurricanes, but over half arises from new production. Overall, crude oil production from the Gulf of Mexico is projected to be 11 percent higher than in 2007. See the graph below:

Additionally, U.S. crude oil stocks continue to track well within the historic average range indicating an adequate supply to meet current needs. See below:

As we have stated before, we are not suggesting that one day the world will not reach a point where crude oil demand exceeds supply. However, projections of when that will occur are highly speculative. In the near term it will behoove the incoming presidential administration to not be stampeded by special interest groups concerning oil shortages. Developing an open and qualified staff of oil experts will go a long way to overcoming the misinformation spewed out by the likes of Cheney or Palin. A planned and well thought out energy policy is what is needed and there is plenty of time to cautiously address the issues.

U.S. natural gas production grew by 9% between the first 7 months of 2007 and the first 7 months in 2008. To put this growth in perspective, U.S. natural gas production was essentially flat for 9 years from 1998 through 2006, before rising by 4% in 2007. Thus, the growth in 2008 so far appears to mark an historic shift in U.S. natural gas production. See the graph below.

Data from Energy Information Administration 10/29/08

The increased production in the U.S. meant that the country has needed to import less natural gas in 2008 than in 2007, especially in the form of LNG (Liquid Natural Gas). For the first 7 months of 2008, LNG imports fell by 64% compared with the same period in 2007, continuing a trend of reduced imports that started in the second half of 2007. Additionally, the U.S. added more than twice as much in proved reserves as it produced in 2007 and ended the year with the highest total proved reserves since at least 1977, when EIA first estimated proved reserves. The record additions mostly reflect the rapid development of unconventional natural gas recourses made up of coal bed methane and resources like shale and tight, low permeability, formations that use advanced technologies.

This information does not bode well for Governor Palin’s proposed natural gas pipeline, which would deliver natural gas from Prudhoe Bay to markets in Canada and the U.S. by way of some of the earth’s most hostile and remote terrain. As she stated, “We’re building a nearly $40 billion natural gas pipeline, which is North America’s largest and most expensive infrastructure project ever, to flow those sources of energy into hungry markets.” Not only is this project very expensive, it seems that it was crafted by Palin’s team to favor only a few independent pipeline companies and ultimately benefited only one winner, TransCanada Corp., with which she had close ties. Possibly, with new production and proven reserve numbers there will be a better way to spend the $40 billion.