As the US and the globe has struggled to overcome the Great Recession, there has been significant focus, individually and in the national agenda, on economic news from labor, housing, banking etc. as we anxiously seek signs of a sustained recovery. Just as telling, however has a been a lack of anxiety about energy and oil.
The reason oil production has been out of the spotlight is because the upstream energy sector is not in a state of crisis mainly due to massive increase in US and global production due to improvements in enhanced oil recovery (EOR) technology.
The quest for US energy independence that has stimulated developments in horizontal drilling and technologies such as hydro fracking and Plasma Pulse well stimulation have allowed the increase of global energy demand without sparking a price driven crisis like the US experienced in the 1970′s.
Rise in World and U.S. Oil Consumption
Global oil consumption rose by 1.4 percent in 2013, according to the 2013 edition of the annually published BP Statistical Review of World Energy.
Collectively, Asia, South America, and Africa have increased consumption by 5.1 million bopd with far and away the greatest growth occurring in Asia Pacific.
China’s consumption grew by 390,000 bopd, and the U.S. also continues its reliance on oil, with consumption increasing by 400,000 bopd in 2013.
Troubling Trends in World Production
Global production growth lagged consumption growth at a rate of only 0.6%, or 560,000 bopd in 2013.
Even if OPEC were to produce at full capacity, global production would increase no more than 2 million bopd, falling far short of consumption growth.
Also of concern is declining production in Mexico and Venezuela, two major oil-producing countries which has decreased by 900,000 bopd since 2008.
Without U.S. contributions, worldwide oil production would have only increased by 500,000 bopd since 2008.
Facing Peak Oil
Peak oil is a theory that states because oil is a non-renewable resource, oil production must eventually peak and fall.
Another aspect of peak oil is the exact time of its occurrence is not predictable. Peak oil will only be recognized when it is reached.
Some think peak oil had occurred in 2008, with spikes in oil prices and little signs of increased production, but the increases in U.S. oil production showed this was not the case.
Draw of U.S. Oil Independence
U.S. oil independence is primarily worth pursuing for national economic reasons. The U.S. transportation industry absolutely depends on oil, and a shortage would lead to devastating consequences nationally.
Another benefit of U.S. oil independence is avoiding the need to depend on a potentially inconsistent oil supply.
The Middle East is often in political turmoil. For example, production in Libya has decreased by nearly 1 million bopd since the Arab Spring.
The oil supply from Iraq has so far been uninterrupted, but there are no guarantees the country will remain stable enough to produce a consistent and predictable supply in the future.
U.S. relations with Venezuela are often shaky, and oil production has dropped by 50 percent since war broke out between South Sudan and Sudan.
U.S. Oil Industry Meeting the Challenge
At a time when the world craves stability and is increasingly relying on oil, the U.S. oil industry has increased production, mainly through enhanced oil recovery (EOR).
U.S. tight oil production has increased from about 0.5 million bopd in 2008 to over 3.5 million bopd in 2014.
The industry’s overall production has increased by 3.2 million bopd since 2008. Together with the net drop in U.S. oil consumption since 2008, the U.S. has been able to simultaneously export oil and stabilize oil prices to prevent economic panic.
The increase in oil production has primarily been in tight oil formations, namely the shale regions including Marcellus in the Appalachian Basin; Eagle Ford, Spraberry, Bonespring, and Wolfcamp in Texas and New Mexico; Bakken in Montana and North Dakota; and Niobrara-Codell in Colorado and Wyoming.
Enhanced Oil Recovery (EOR): Worth the Investment
BP’s 2013 annual report says the world has enough oil to meet consumption for another 53 years, but the only way to tap into that oil is through EOR methods.
Hydraulic fracturing, or fracking, is one such method. Plasma Pulse technology works on similar principles, but is cleaner because it uses a plasma arc to increase oil flow instead of high volumes of water and chemicals.
Supporting EOR and U.S. energy companies makes sense because only through continued extensive oil production can the U.S. continue to work toward oil independence and helping to supply the rest of the world.