Posted December 29, 2014
The Week: One of the biggest stories of 2014 has been the astonishing drop in global oil prices. The price of the benchmark Brent crude went from over $100 per barrel at the beginning of the year to the $60 range as of this writing.
It's worth noting how massive and completely unexpected this price drop has been.
And it's worth noting how good it is for the U.S. economy. The price of oil is one of the biggest drags on consumer demand, the largest driver of the economy.
And to what do we owe this miraculous event?
In a word: fracking.
Posted December 24, 2014
The gift that is American energy is seen in some key numbers: domestic crude oil production reaching more than 9 million barrels per day last month, the highest level in more than two decades, according to the U.S. Energy Information Administration (EIA); total U.S. net imports of energy as a share of energy consumption falling to their lowest level in nearly 30 years during the first six months of this year; gasoline prices dropping to an average of $2.47 per gallon last week, their lowest point since May 2009, according to the Lundberg Survey Inc.
The first two numbers might not fully register with a lot of Americans. We’ll come back to them. The last one, gasoline prices, does so loudly.
Retail gasoline prices fell after crude oil prices dropped for the fourth straight week – a product of weaker-than-expected global demand and increasing production, which EIA says will save American households $550 next year, Bloomberg News reports. Trilby Lundberg, president of Lundberg Survey to Bloomberg:
“It is a dramatic boon to fuel consumers. (Gasoline) is a modest portion of our giant gross domestic product and yet it does have a pervasive and festive benefit to motorists.”
During this season of gift-giving and receiving, Americans should give thanks for the gifts of plentiful domestic oil and natural gas, modern technologies to harness them and an industry robust and innovative enough to bring the two together, resulting in surging, home-grown production. Indeed, the dramatic increase in U.S. oil production is the key addition to global supply that’s putting downward pressure on the cost of crude, the No. 1 factor in pump prices.
Posted November 27, 2014
Happy Thanksgiving everybody.
When it comes to energy there’s much for which Americans can give thanks.
We have plentiful and accessible reserves of oil and natural gas that fuel healthy, mobile, modern lifestyles.
We enjoy safe and secure crude oil imports from Canada, our neighbor and ally and No. 1 source of imported oil.
Our country is served by a vibrant, modern industry – one that’s second to none in the use of safe, hydraulic fracturing and horizontal drilling, offshore development and environmental awareness.
America keeps running thanks to a vast pipeline network and the world’s biggest, most-efficient refineries. And there’s more.
Posted October 28, 2014
Real Clear Politics: Few policy objectives over the last half-century have proven as tantalizing for presidents as the call to achieve energy independence.
In 1973 -- as a gasoline shortage consumed the nation -- President Richard Nixon outlined Project Independence 1980, “a series of plans and goals set to insure that by the end of this decade, Americans will not have to rely on any source of energy beyond our own.” Gerald Ford, in his 1975 State of the Union address, called for “a massive program” to ease demand and increase supply “to achieve the independence we want by 1985.” Jimmy Carter, more modestly, aimed for the United States to cut its dependence on foreign oil by half by the end of the 1980s.
Ronald Reagan, George H.W. Bush, Bill Clinton, George W. Bush, and Barack Obama all set similar goals at different points in their presidential campaigns or presidencies. Typically, their political opponents did too. Little serious progress toward those goals was achieved during most of their terms in office.
Posted October 14, 2014
A new study by the Aspen Institute joins a series of analyses concluding that one benefit from exporting U.S. crude oil would be lower gasoline prices here at home. Aspen’s projected reduction of between 3 and 9 cents per gallon parallels findings in previous major studies by ICF International (3.8 cents per gallon), IHS (8 cents) and Brookings/NERA (7 to 12 cents) that exports would lower pump prices.
Aspen and the other studies project other benefits from exporting crude oil, including broad job creation, economic growth and increased domestic energy production. Yet the solidifying consensus that consumers also would benefit is critically important as the public policy debate on oil exports continues.
Posted October 7, 2014
Reuters: As oil production swells, demand falters and prices slide, the global oil market appears on the verge of a pivotal shift from an era of scarcity to one of abundance.
Oil prices have fallen as much as 20 percent since June, despite a host of rising supply risks, leading more investors and traders to consider whether 2015 is the year in which the U.S. shale oil boom finally tips the world into surplus.
While the plunge has rekindled speculation that the Organization of the Petroleum Exporting Countries (OPEC) may need to cut output for the first time in six years when it meets next month, some analysts are looking much further ahead.
They say a long-anticipated fundamental shift in the market may now be under way, ending a four-year stretch when $100-plus prices were the norm, and opening a new era in which OPEC restraint once again becomes paramount.
Posted October 6, 2014
CNBC (Chevron Chairman and CEO John Watson): Over the last 150 years, we've seen the greatest advancements in living standards in recorded history — advances enabled by affordable and reliable energy that have brought light, heat, mobility, modern communications and other benefits to billions of people around the world. The United States has helped lead many of these advancements — by spreading our ideals of free markets, open trade, rule-of-law and limited state involvement. In doing so, we've allowed private initiative to innovate and drive progress.
As more of the world seeks to capitalize on these advancements, the ensuing spread of wealth is helping to lift more people into the middle class and realize these same benefits. In the past 10 years, the world has added three-quarters of a billion people to the middle class.
And despite some struggles of our own, America's business and economic system remains the envy of much of the world. Yet it's a system that continues to evolve … and change.
Perhaps the most dramatic changes have been in the U.S. oil and natural gas sector, where we've launched an energy revolution, fueled by technology and innovation, that's allowing us to produce more from oil and gas fields and develop new geographic frontiers. In the last decade, we've rewritten the U.S. energy story — from one focused on scarcity to one focused on abundance.
Posted August 29, 2014
Supply matters. The impact of the U.S. energy revolution on global supply, with real benefits reaching consumers, is seen we head into the Labor Day weekend. The U.S. Energy Information Administration (EIA) reports the U.S. average retail price for gasoline on Aug. 25 was the lowest price on the Monday before Labor Day since 2010. EIA explains:
The recent decline in gasoline prices largely reflects changes in crude oil prices. In June of this year, the Brent spot price reached its year-to-date high of $115/barrel (bbl), then fell to $102/bbl on August 22. Current Brent prices are below their August average level over the past three years, which ranged between $110/bbl and $113/bbl.
This parallels another EIA report, crediting the surge in U.S. crude oil production with a more stabilized global crude market:
Record-setting liquid fuels production growth in the United States has more than offset the rise in unplanned global supply disruptions over the past few years … U.S. liquid fuels production, which includes crude oil, hydrocarbon gas liquids, biofuels, and refinery processing gain, grew by more than 4.0 million barrels per day (bbl/d) from January 2011 to July 2014, of which 3.0 million bbl/d was crude oil production growth. During that same period, global unplanned supply disruptions grew by 2.8 million bbl/d. U.S. production growth, the main factor counterbalancing the supply disruptions on the global oil market, has contributed to a decrease in crude oil price volatility since 2011.
More simply, supply matters. Because crude oil is traded globally, every additional barrel of U.S. production going into that market has impact.
Posted August 29, 2014
New York Times: THREE RIVERS, Tex. — Whenever overseas turmoil has pushed energy prices higher in the past, John and Beth Hughes have curbed their driving by eating at home more and shopping locally. But the current crises in Ukraine and Iraq did not stop them from making the two-hour drive to San Antonio to visit the Alamo, have a chicken fried steak lunch, and buy fish for their tank before driving home to Corpus Christi.
“We were able to take a day-cation because of the lower gas prices,” said Ms. Hughes.
The reason for the improved economics of road travel can be found 10,000 feet below the ground here, where the South Texas Eagle Ford shale is providing more than a million new barrels of oil supplies to the world market every day. United States refinery production in recent weeks reached record highs and left supply depots flush, cushioning the impact of all the instability surrounding traditional global oil fields.
Posted July 18, 2013
The history of modern crude oil prices includes a number of instances where historical events have accompanied dramatic price shifts. Simply: Events that impact or could impact supply affect the global crude oil market. And, because the cost of crude is the main driver of gasoline prices – currently about 66 percent