The U.S. will become the world’s top producer of oil within five years, a net exporter of the fuel around 2030 and nearly self-sufficient in energy by 2035, according to a new report from the International Energy Agency.
It’s a bold set of predictions for a nation that currently imports some 20% of its energy needs, according to a report by the Los Angeles Times.
Recently, however, an “energy renaissance” in the U.S. has caused a boost in oil, shale gas and bio-energy production due to new technologies such as hydraulic fracturing, or fracking. Fuel efficiency has improved in the transportation sector. The clean energy industry has seen an influx of solar and wind efforts.
By 2015, U.S. oil production is expected to rise to 10 million barrels per day (bpd) before increasing to 11.1 million bpd by 2020, overtaking second-place Russia and front-runner Saudi Arabia. The U.S. will export more oil than it brings into the country in 2030.
Around the same time, however, Saudi Arabia will be producing some 11.4 million bpd of oil, outpacing the 10.2 million from the U.S. In 2035, U.S. production will slip to 9.2 million bpd, far behind the Middle Eastern nation’s 12.3 million bpd. Iraq will exceed Russia to become the world’s second largest oil exporter.
At that point, real oil prices will reach $125 a barrel. By then, however, the U.S. won’t be relying much on foreign energy, according to the IEA’s World Energy Outlook.
Globally, the energy economy will undergo a “sea change,” according to the report, with nearly 90% of Middle Eastern oil exports redirecting toward Asia.
To read the entire article click here.
Oil prices fell on Wednesday (Sept. 19) for the third day in a row as traders realized that a recent run-up to $100 may have been overdone. The Associated Press reported that oil was at $91.99 in early afternoon trading on the New York Mercantile Exchange. It was down $3.30, or 3.5%.
Several things were pushing prices down. Analysts said traders are taking profits after oil got above $100 per barrel on Friday for the first time since May. And there have more signs this week that the global economy is slowing down, which tends to push oil prices lower because people and businesses use less energy.
Also, crude inventories rose three times more than analysts had expected last week. Crude supplies grew by 8.5 million barrels to 367.6 million barrels. That’s 8.4% higher than at the same time last year, according to the Energy Information Administration’s weekly report.
Analysts expected a rise of 2.5 million barrels, according to Platts, the energy information arm of McGraw-Hill Cos.
Oil has fallen about 7% this week. It hadn’t dropped below $92 per barrel since Aug. 10. Regular gasoline at the pump fell a half a penny to $3.854 per gallon.
Oil’s decline came despite some news that might have pushed prices higher. The Bank of Japan said on Wednesday that it would buy more government bonds, which is intended to boost Japan’s economy. And ongoing tensions in the Middle East have tended to drive prices higher.
“Yet we continue to fall,” said Addison Armstrong, senior director for market research at Tradition Energy. “I think that has accelerated some profit-taking. After all, crude did have a pretty good run from $86 up to $100.”
Brent crude traded on the ICE Futures exchange in London also fell sharply. It was down $3, or 2.7 percent, to $109.03 per barrel.
Traders were also keeping their eyes on oil supplies as U.S. Gulf Coast refineries returned to production after shutting down due to Hurricane Isaac.
“We’re getting back a few more refineries post (Hurricane Isaac), but on the flip side a few refineries had some restart issues and a few are headed into maintenance,” said Carl Larry of Oil Outlooks and Opinions in a newsletter.
Just when companies have finally stepped up hiring, rising oil prices are threatening to halt the U.S. economy’s gains.
Some economists are scaling back their estimates for growth this year, in part because flat wages have left households struggling to pay higher gasoline prices, Associated Press reported.
Oil has topped $108 a barrel, the highest price since 2008. Regular unleaded gasoline now goes for an average $3.69 a gallon, according to AAA’s daily fuel gauge survey, up 86 cents from a year ago.
The higher costs have been driven by unrest in Libya and other oil-producing Middle East countries, along with rising energy demand from a strengthening U.S. economy.
Airlines, shipping companies and other U.S. businesses have been squeezed. The rising prices are further straining an economy struggling with high unemployment and a depressed housing market.
“The surge in oil prices since the end of last year is already doing significant damage to the economy,” says Mark Zandi, chief economist at Moody’s Analytics.
Unlike other kinds of consumer spending, gasoline purchases provide less benefit for the U.S. economy. About half the revenue flows to oil exporting countries like Saudi Arabia and Canada, though U.S. oil companies and gasoline retailers also benefit.
For consumers, more expensive energy siphons away money that would otherwise be used for household purchases, from cars and furniture to clothing and vacations.
High energy prices are “putting a drain on consumer budgets,” says James Hamilton at the University of California, San Diego. “To the extent they’re having to spend more on gasoline, they have to make cutbacks elsewhere.”
Two-thirds of Americans say they expect rising gasoline prices to cause hardship for them or their families in the next six months, according to a new Associated Press-GfK Poll. The telephone poll conducted March 24-28 had a sampling error margin of plus or minus 4.2 percentage points.
Seventy-one percent say they’re cutting back on other expenses to make up for higher pump prices. Sixty-four percent say they’re driving less. And 53%say they’re changing vacation plans to stay closer to home.
The oil shock and global instability are diluting the benefits of an improving job market. The unemployment rate, though still high, is at a two-year low. And the economy has just produced the strongest two months of hiring since before the recession began.
Bernard Baumohl, chief economist at the Economic Outlook Group, has slashed his estimate for growth this year to 2.8% from 3.5%. In 20010, the economy grew 2.9%.
Consumer spending accounts for about 70% of the economy. After adjusting for inflation and for seasonal factors, consumers spent 0.3% more in February than in January.
But that’s unlikely to last. Gasoline prices are surging just as inflation-adjusted incomes are falling. More expensive gas is draining much of the cash Americans are receiving from a cut in Social Security taxes this year.
Zandi estimates that higher oil prices shaved 0.5 percentage point from growth in the January-March quarter. He predicts the economy grew 2.6% during the quarter.
If oil prices average $100 a barrel for the year, Zandi says, growth will be 0.3 percentage point lower than if prices had stayed at last year’s level — an average of less than $80 a barrel. A few months of $125-a-barrel oil would slash economic growth by a full percentage point, Zandi says. And a few months at $150 a barrel could push the economy back into recession.
Surging oil prices don’t hurt everybody in the United States. Oil companies, for example, stand to gain. In 2008, Exxon Mobil Corp. earned $45 billion — a record for a U.S. company — after oil prices hit a record $150 a barrel.
Oil services companies such as Halliburton Co., Schlumberger Ltd. and Baker Hughes Inc. also benefit as the oil industry rushes to find and produce more oil. And the products of biodiesel and other alternative energy companies become more competitive the higher oil prices go.
In a speech last week, Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, offered hope that higher oil prices won’t persist long enough to do much damage.
“Large increases in food or energy prices tend to be temporary,” Pianalto said. “History shows that they are often followed by sharp declines.”
But Mark Pawlak, a market strategist at Keefe, Bruyette & Woods, says he worries about a repeat of what happened to the economy last year: It built momentum at the start of 2010, only to stall in the face of a European debt crisis and a run-up in oil prices from February to April.
Oil prices hit a 29-month high today (March 4) after the government said the nation’s unemployment rate fell to 8.9% in February, the Associated Press reported.
The Labor Department said the economy added 192,000 jobs last month. That suggests more people will be driving to work at a time when world oil supplies are under pressure because of the Libyan crisis and unrest in the Middle East.
Benchmark West Texas Intermediate crude for April delivery gained $2 at $103.91 per barrel in New York. The price jumped to $104.64 per barrel earlier in the session, the highest level since Sept. 29, 2008.
Gasoline prices have shot up an average of 35 cents per gallon since an uprising in Libya began in mid-February. A gallon of regular unleaded gained another 4.4 cents overnight to a new national average of $3.471 per gallon, according to AAA, Wright Express and the Oil Price Information Service.
Pump prices are soaring much faster than analysts expected, as a wave of rebellions sweeps across North Africa and the Middle East. Prices should peak between $3.50 and $3.75 per gallon this spring, according to Tom Kloza, OPIS chief oil analyst.
In Libya, tensions escalated further today as forces loyal to Moammar Gadhafi used tear gas to repel protesters in Tripoli. Most of Libya’s oil production has been shut down because of the crisis, and experts say the country’s oil fields will be threatened as long as there’s no clear leader in charge.
Saudi Arabia has increased production to make up for the loss of Libyan crude, but a lengthy struggle could put significant pressure on world supplies. Traders are still concerned that the unrest in North Africa, which already has ousted leaders in Tunisia and Egypt, will encourage pro-reform protesters to dig in and further challenge neighboring regimes in the Middle East.
North Africa and the Middle East are home to the largest oil producers in the world and export a quarter of the world’s oil.
Oil prices rose today as anxious traders prepared for the weekend. Two weeks ago, oil surged more than $7 per barrel in electronic weekend trading, and prices are again climbing on the expectation that oil will jump before Monday trading begins.
Oil is getting more expensive as the economy of the world’s largest oil consumer, the U.S., appears to be improving. Last month, employers hired at the fastest pace in almost a year, pushing the unemployment rate down to the lowest level since April 2009. Retailers reported surprisingly strong revenue gains in February and businesses ordered more manufactured goods from U.S. factories in January.
The Energy Department said this week that petroleum demand has grown for four straight weeks, resulting in unexpected drops in the nation’s oil and gasoline supplies last week.
“The economy just seemed to be getting its mojo back,” PFGBest analyst Phil Flynn said. “The question, now, is when will higher energy prices take that mojo away?”
Analysts say the economy can probably stay on the upswing as long as oil stays below $120 per barrel. If it goes higher, and pushes up the cost of fuel, consumers could rein in spending, commuters may opt for public transportation and car pools, and leisure travelers will probably vacation closer to home.
“That’s when it really starts to do damage,” Flynn said.
If oil rises to $150 or more per barrel, and holds at that level for months, it could trigger another recession, economists said.
In other Nymex trading for April contracts, heating oil added 3 cents at $3.0777 per gallon and gasoline futures gained 2 cents at $3.0429 per gallon. Natural gas gained 2 cents at $3.795 per 1,000 cubic feet.
In London, Brent crude added $1.42 at $116.21 per barrel on the ICE Futures Exchange.
Federal Reserve Chairman Ben Bernanke boldly predicted to Congress on Tuesday (March 1) that rising oil prices will cause only a brief and modest rise in consumer inflation, the Associated Press reported.
If he’s wrong, as some lawmakers suggested to him, the risks are high: a weaker economy and elevated consumer inflation.
Bernanke’s credibility is at stake, too. His duties as Fed chief require a balancing act: Leading the economy to stronger growth while making sure inflation doesn’t rise too high.
Appearing before the Senate Banking Committee, Bernanke faced sharp questions about whether rising gasoline prices could spread dangerous inflation through the economy. He said he did not think so.
“The most likely outcome is that the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in U.S. consumer price inflation,” Bernanke said.
Still, persistently higher prices could shake consumer confidence, prompting consumers to reduce spending. And that would weaken the economy, he acknowledged.
Gas prices jumped over the weekend to a new nationwide average of $3.37 a gallon. That’s 26.7 cents a gallon more than a month ago. Food prices in January rose at the fastest pace since the fall of 2008.
Sen. Patrick Toomey, R-Pa., called the rise in commodity prices “stunning.” Toomey said he worries about the effects of those higher prices, combined with the Fed’s efforts to boost the economy through a Treasury bond-purchase program. Toomey said they might be “planting the seeds of serious inflation down the road.”
Bernanke defended the Fed’s $600 billion Treasury bond-buying program. He said it is still needed to energize the economy and reduce unemployment, now at 9%. The bond-buying program is intended to lower rates on loans and lift stock prices, spurring more spending.
Republicans in Congress and some Fed officials say they fear the bond purchases could trigger high inflation and a wave of speculative buying on Wall Street that could lead to new bubbles in the prices of assets like stocks and bonds.
“Once price stability has been lost, it is difficult and very costly to regain,” warned Sen. Richard Shelby of Alabama, the panel’s top-ranking Republican.
Shelby pointed to the toxic situation in the late 1970s and 1980s when inflation hit double digits. To combat out-of-control prices, Fed Chairman Paul Volcker ratcheted up interest rates. Unemployment soared. And the economy fell into a deep recession.
Bernanke said the rise in oil and global commodities prices was due to stronger demand from fast-growing countries like China, not to the Fed’s stimulative policies. But he ran into concerns from Democrats as well as Republicans on the committee.
“I see food prices rising,” said Sen. Robert Menendez, D-N.J. “I see gas prices rising even before what was happening in North Africa, although that certainly is an exacerbating reality. Tuition rates rising … I just see a combination of rising prices for the average family.”
One reason the Fed launched the bond-buying program in November was to prevent deflation — a prolonged drop in prices of goods, wages and values of homes and stocks. But Bernanke told lawmakers that the risk of deflation has become “negligible.”
Click here to hear the following story courtesy of National Public Radio.
The turmoil in Libya sent oil prices sharply higher around the world Tuesday (Feb. 22). In New York, prices reached a 2 1/2-year high of nearly $94 a barrel. That, in turn, sent stock prices down, with the Dow Jones industrial average tumbling 178 points.
The spike in oil prices reflects fears that the political turmoil could spread to Gulf countries that produce a lot of oil.
After the 1988 bombing of Pan Am Flight 1903 over Lockerbie, Scotland, the United States imposed economic sanctions on Libya. For many years, U.S. companies were barred from doing business in the country. Once the sanctions were lifted, companies including Marathon Petroleum and Exxon Mobil rushed to take a piece of Libya’s huge oil reserves.
Gadhafi and his cronies put this money in their bank accounts and obviously that’s why the people are rioting — because they don’t see anything trickling down to them.
Energy analyst Fadel Gheit of Oppenheimer & Co. notes that the companies had to pay dearly to do business with Moammar Gadhafi’s regime.
“Gadhafi and his cronies put this money in their bank accounts and obviously that’s why the people are rioting — because they don’t see anything trickling down to them,” Gheit says.
Partly as a result of the sanctions, Libya’s oil industry hasn’t developed as fast as it could, according to Gheit. It produces about 1.8 million barrels of oil a day, about 2% of the world’s output. And even if Libya stopped producing oil altogether, there’s enough spare capacity in other countries like Saudi Arabia to make up for the loss.
But the unrest in Libya has sent a shiver through the oil market. Gheit says with the world economy recovering, there’s a growing demand for oil.
“In a tight market for whatever reason, any perception of supply disruption will have an impact on price,” he says.
Gheit says the sheer lack of reliable information coming out of Libya has made the markets especially nervous. Gadhafi’s decision to declare force majeure over its oil contracts Tuesday was another worrisome sign. It allows the regime to break any contracts it has signed with oil companies.
“It usually indicates there are deeper troubles, so I think many people are watching now to see what is the reason for this and what does it mean for Libyan exports into the marketplace,” says David Pumphrey, an oil expert at the Center for Strategic and International Studies.
But what’s really scaring the markets, he says, is what the Libyan unrest says about the region as a whole. The first two countries to be swept up in the unrest — Tunisia and Egypt — weren’t big players in the energy business and the markets could shrug off their impact. Since then, the violence has spread to Bahrain and now Libya, he notes.
“We’re beginning to see an accumulation of situations,” Pumphrey says. “Individually none of them should be a problem. Taken together, I think it causes more concern, especially if there is a risk that some of this spreads to the really big producers in the Gulf states.”
The real fear is that the turmoil could extend to Saudi Arabia, the region’s biggest oil supplier by far. In that case, the increases in oil prices that the world has seen so far will seem small by comparison.
Oil prices fell today (Dec. 8) in Asia as traders locked in profits after crude rose above $90 a barrel for the first time in more than two years, the Associated Press reported.
Benchmark oil for January delivery was down 86 cents to $87.83 a barrel at late afternoon Kuala Lumpur time in electronic trading on the New York Mercantile Exchange.
The contract hit $90.76 on Tuesday, the highest price since Oct. 8, 2008, before pulling back to settle at $88.69, down 69 cents.
The pull back is not surprising, said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. “It is primarily profit-taking after crude breached the $90 level in New York.”
The rally Tuesday came as President Obama and Republican leaders hammered out an agreement to extend Bush-era tax cuts. A cold snap also swept through Europe and the U.S., lifting demand for fuel.
Some analysts now predict that oil will hit $100 per barrel sometime next year. They point to rising demand from China and other emerging economies. OPEC countries can crank up production to meet that demand now, but their ability to do that is expected to decline over the next few years.
Shum, however, said the $90 level wasn’t sustainable for now amid persistent concerns about the spread of Europe’s debt crisis to Portugal and Spain. This boosts the dollar and depresses the oil price as it makes the commodity more expensive for investors holding other currencies.
Fears that China may raise interest rates are also dampening the oil market, which is likely to trade between $85 and $90 in the near term, Shum said.
Traders will seek more clues on the strength of crude demand from U.S. government supply figures later today. The American Petroleum Institute’s report Tuesday was mixed, showing a drawdown in crude oil stocks but a rise in distillate and gasoline inventories.
In other Nymex trading in January contracts, heating oil fell 1 cent to $2.46 a gallon, gasoline futures gave up 1.4 cents to $2.31 a gallon and natural gas rose 1 cent to $4.41 per 1,000 cubic feet.
In London, Brent crude fell 46 cents to $90.93 a barrel on the ICE Futures exchange.