Last year the United States saw the single largest increase in petroleum production since the first commercial oil well was drilled in 1859. At the current breakneck pace of increases, the U.S. is set to surpass Saudi Arabia in oil production in just 7 more years.
Advances such as hydraulic fracturing are leading to record production that may outstrip refinery capacity within 18 months to three years, said Benjamin Salisbury, a senior energy policy analyst at FBR Capital Markets Corp. in Arlington, Virginia. Net petroleum imports now account for about 40 percent of demand, down from 60 percent in 2005, according to the U.S. Energy Information Administration, the Energy Department research unit.
Unfortunately, just like the political follies we’ve seen with natural gas, certainly more of the same will follow when it comes to crude exports. As it is now, most crude exports are still illegal thanks to bans passed by Congress after the oil embargo of the early 70′s. Due to the political ineptitude that is all too common in Washington, authorizing exports of crude may be a struggle and a difficult sell to the general public. While on the surface it may seem counter-intuitive to ship the oil away, a quick look into pricing clears it up.
The U.S. is currently awash in crude oil and has large stockpiles in places like Cushing, Oklahoma. Without furthered increases in demand (through exports to foreign nations), prices will begin to sink, and producers will curtail drilling, thus deflating our potential energy behemoth status. Robin West of PFC Energy recently told a similar story according to Bloomberg.
“It’s a fairly short period of time, it’s a couple of years, before we effectively hit the wall,” West said at a June 12 conference in Washington. “That will start affecting price, which in turn will start affecting production.”