The Reemergence of the U.S. as a
Global Petroleum Producer
Edwin M. Bennion
Economist
Division of International Price
International Price Program Discussion Series
February 25, 2014
1
A Major Event

The month of October, 2013 was
notable.
For that month the U.S. produced more
petroleum domestically than it imported.
– First time since March of 1995.

Symbolic of the reemergence of U.S.
petroleum production.
An industry that had been in decline.
2
The Halcyonian Days are Here

I.E.A Projections:
By 2014 U.S. will produce more oil & gas
than ever before.
Domestic petroleum production will
surpass imports in 2014.
U.S. will surpass Saudi Arabia in production
before 2020.
Net exporter of oil by 2030.

BP Energy Outlook – U.S. will be energy
independent by 2035.
3
How Did the U.S. Get Here?

What factors have brought about such a
change from a decade ago?
U.S. production has drastically increased
since 2009.
Domestic consumption has fallen.
Imports have declined.
4
The Birth of an Industry

First commercial well in 1859 near
Titusville, PA. Oil boom followed.
5
The Birth of an Industry
Oil boom quickly spread throughout
Appalachian Basin & Ohio River Valley.
 Early 20c. national boom.

California – 1880
Kansas - 1892
Central Texas – 1894
Oklahoma - 1905
Louisiana - 1906
East Texas – 1930
6
The Birth of an Industry

Long Beach, CA in 1926.
7
U.S. Production Booms
U.S. Field Production of Crude Oil, 1900 - 1970
Thousands of Barrels
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
8
1970: U.S. Dominates

U.S. ranked 1st in global production.
Produced 9.6 million bbl/d.
Total of 3.517 billion barrels.

By comparison:
Russia – 6.3 million bbl/d.
Saudi Arabia – 3.8 million bbl/d.
Venezuela – 3.7 million bbl/d.
9
Slow Decline

From 1971 onwards U.S. production
gradually declined.
1975 – Russia surpassed U.S. in production
1976 - Saudi Arabia too.
1989 – Daily production fell below 8 million
barrels.
1998 – Fell below 6 million bbl/d.
10
Rise of U.S. Imports

U.S. Consumption of petroleum steadily
increases.
1980: 17,056 thousand bbl/d.
2005: 20,802 thousand bbl/d.

U.S. imports steadily climb.
1980: 5,263 thousand bbl/d.
2005: 10,126 thousand bbl/d.
11
The Rise of U.S. Imports
U.S. Consumption & Imports of Crude Oil, Jan 1983 to Dec 2006
Thousand Barrels per Day
25000.0
20000.0
15000.0
10000.0
5000.0
0.0
Jan-1983
Jan-1985
Jan-1987
Jan-1989
Jan-1991
Jan-1993
Jan-1995
Jan-1997
Jan-1999
Jan-2001
Jan-2003
Jan-2005
12
2005-7: A Low Point

2005: imports reached 3.7 billion
barrels.
Over 3.69 billion barrels for 2006.
3.66 billion in 2007.

Production has declined steadily since
1970.
Dropped 47% to 1.8 million barrels.
Output on par with 1947.

Consumption: 20.7 million bbl per day.
13
U.S. Imports Decline

Imports steadily declined starting in
2007.
Dropped 3.8% in 2008, 9.7% in 2009.
Fell a further 16.9% between 2011 and
2013.

By 2013 annual imports 3.5 billion bbl.
A decline of 21% from 2007.
Lowest amount of petroleum since 1996.
14
U.S. Imports Decline
U.S. Petroleum Imports, Jan 2005 to Nov 2013
Thousand Barrels
350000
300000
250000
200000
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
15
Causes of the Decline

U.S. Consumption fell significantly.
2007: 20.7 million bbl per day.
2013: 18.7 million bbl per day.
Decline of 9.7%.
Annual consumption level on par with
1996.

Where do the declines occur?
16
Transportation Sector

Accounts for 70% of U.S. petroleum
usage.
Usage fell 9.1% from 2007 to 2012.
– Gasoline consumption declined 6.6%.
– Miles driven by Americans declined.
• Dropped 2.5% from 2008 to 2012
Not limited to transportation.
– Industrial consumption: -10.9%.
– Residential consumption: -15.0%.
– Commercial consumption: -2.5%.
17
Consumption & Imports
U.S. Consumption & Imports of Crude Oil, Jan 2007 to Sep 2013
Thousand Barrels per Day
23000.0
21000.0
19000.0
17000.0
15000.0
13000.0
11000.0
9000.0
Jan-2007
Jul-2007
Jan-2008
Jul-2008
Jan-2009
Jul-2009
Jan-2010
Jul-2010
Jan-2011
Jul-2011
Jan-2012
Jul-2012
Jan-2013
Jul-2013
18
U.S. Production Increases

Held fairly stead from ’06 thru ’08, then
jumped 6.8% in ’09.
First increase in U.S. production since 1991
(18 years).
Continued to climb steadily, in ’10 & ’11
then skyrocketed in ’12 & ’13.
 Since ’08 U.S. production has jumped
47.2%.

19
U.S. Production Increases
U.S. Petroleum Production, Jan 2005 to Nov 2013
Thousand Barrels
230000
220000
210000
200000
190000
180000
170000
160000
150000
140000
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
20
The Gap Narrows
U.S. Petroleum Imports & Production, 2005 to 2013
Thousand Barrels
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
2005
2006
2007
2008
Domestic Production
2009
2010
2011
2012
2013
Imports
21
Where is it Coming From?

Production increases occur in a number
of states.
Oklahoma, New Mexico, Colorado,
Wyoming, and Kansas.

Only two states are really significant.
North Dakota.
Texas.
22
That’s Where the Oil Is!
23
U.S. Production Increases
Crude Oil Production, Dec 2004 - Nov 2013
Thousand Barrles
90,000
120.0
80,000
110.0
100.0
70,000
90.0
60,000
80.0
50,000
70.0
40,000
60.0
30,000
50.0
20,000
40.0
10,000
0
Dec-2004
30.0
20.0
Dec-2005
Dec-2006
Dec-2007
North Dakota
Dec-2008
Dec-2009
Texas
Dec-2010
Dec-2011
Dec-2012
WTI Spot Price
24
Oil Reserves

Just how much is there?
Bakken & Three Forks – 7.4 billion barrels
from USGS.
– Produces 862,987 barrels per day.
Eagle Ford – 3 billion barrels.
– Produces 677,407 barrels per day.
Woodford – 500 million barrels.
25
Drilling Activity

Drilling activity has expanded.
Petroleum Production & Drilling Activity, 2007 - 2013
Rigs
Thousand Barrels
2,800,000
1600
2,600,000
1400
2,400,000
1200
2,200,000
1000
2,000,000
800
1,800,000
600
1,600,000
400
1,400,000
200
1,200,000
1,000,000
0
2007
2008
2009
2010
Domestic Production
2011
2012
2013
Rotary Rigs
26
Drilling Activity

Night lights image from NASA’s Suomi
satellite.
27
Import Prices
How have the rise in U.S. production
and decline in imports and
consumption impacted import prices?
 Initially not much of one.

Strong global demand, especially from Asia
Lower production from several OPEC
nations
Global Supply Shocks.
28
Import Prices
Imports, Production, & Import Prices, Jan 2010 to
Thousand Barrels
Nov 2013
Index Value
300000
450
280000
400
260000
350
240000
300
220000
250
200000
200
180000
150
160000
100
140000
120000
Imports
Production
Import Index Value
100000
50
0
Jan-10
Jan-11
Jan-12
Jan-13
29
Import Prices

From Dec 2009 thru 2011 import prices
increased 42.3%.
Yet U.S. consumption only rose 0.6%.
Domestic imports fell 1.0%.
U.S. production increased 5.1%.

So why did the price increase?
30
Truly Global Market
World supply remained tight in 2010 &
2011. Only increased 3.5%.
 Strong global demand, especially from
Asia. Consumption increased 4.5%.

Chinese consumption increased 15.4%.
Indian consumption increased 9.6%.
Asian consumption as a whole up 9.7%.
31
Political Unrest

Supply disruption in Libya, production
falls by 1.3 million bbl/d.
Equal to 1.7% of global production.
Production was slow to return.

Ousting of Hosni Mubarak in Egypt.
Concerns regarding the Suez Canal.

Tension with Iran.
20% of world’s petroleum passes through
Strait of Hormuz.
32
2012 & 2013

Import prices leveled off in 2012 then
fell through 2013.
Declined 2.7%
Production increased in Canada, Russia,
OPEC countries, and the U.S.
 Global consumption slowed, increasing
0.6 % in 2012, compared to 1.3% in
2011 & 3.1% in 2010.

33
How Much Oil is There?

Some estimates of oil reserves in U.S.
shale formations.
Spraberry/Wolfcamp Field, TX – 100 billion
recoverable barrels.
Bakken Formation, N.D. – 503 billion bbl.
Uinta Basin, Utah – 1.3 trillion bbl.
Piceance Basin, Colorado – 1.5 trillion bbl.
34
Not Limited to the U.S.
35
Not Limited to the U.S.
2013 U.S. Department of Energy
released global assessment of reserves.
 These are “technically recoverable.”

Russia – 75 billion barrels.
China – 32 billion barrels.
Argentina – 27 billion barrels.
Libya – 26 billion barrels.
36
Contact Information
Edwin M. Bennion
Economist
Division of International Prices
www.bls.gov/xxx
202-691-7142
[email protected]