U.S. Oil Output to Overtake Saudi Arabia’s by 2020

http://www.bloomberg.com/news/2012-11-12/u-s-to-overtake-saudi-arabia-s-oil-production-by-2020-iea-says.html

by jackfoxy • 14 years ago

103 95 14 years ago

sanxiyn• 14 years ago

I find this hard to believe. Compare http://www.theoildrum.com/node/9584

ChuckMcM• 14 years ago

You can always be assured that predictions based on extrapolation in systems like energy are always wrong. The claim (that we'll out produce Saudi Aramco by 2020) is bogus.

You read comments like this "U.S. oil imports will drop to about 4 million barrels a day in 10 years from a current average of 10 million because of new production and stricter fuel efficiency standards for cars and trucks, which will curb demand, Birol said." and you want to say 'Bzzzt! And thanks for playing' as you consider that people with better gas mileage drive more, they don't 'not drive'. The reason is not intuitive (see the Jevon's Paradox [1]) but it is also not unexplainable either.

It will be interesting if significant chunks of our driving population switches to electrics. That is because the electricity production facilities are built on coal, gas, and nuclear and that could shift our consumption needle off oil toward those other forms. But nobody is yet extrapolating even 10% electric car ownership by 2020 much less the 20 - 30% that would be needed to move the numbers on a national scale.

So the the next question is, "OK if this is bogus, why even write it?" and if I had to guess I would say it was a 'feel good' piece about Fracking to try to offset the ever growing evidence that the dangers of hydraulic fracturing require much more oversight and regulation if we want to do it safely. The extraction companies have not shown a particular willingness to choose 'safety' over 'get it done' yet.

[1] http://en.wikipedia.org/wiki/Jevons_paradox

_delirium2• 14 years ago

> The extraction companies have not shown a particular willingness to choose 'safety' over 'get it done' yet.

I'm not as negative as most people I know on fracking, but I do have some worry that there's a culture like this in place currently. I've been particularly surprised by surface spills/leaks of fracking chemicals in Pennsylvania, which just seems sloppy. If you're trying to convince the public that a fairly new technology, which people have concerns about, is safe and won't contaminate groundwater, you should definitely be sure to get the "easy" parts completely right, such as competently storing chemicals above ground.

cadalac• 14 years ago

>if I had to guess I would say it was a 'feel good' piece about Fracking to try to offset the ever growing evidence that the dangers of hydraulic fracturing require much more oversight and regulation if we want to do it safely

Fracking is indeed extremely dangerous:http://www.cbc.ca/news/canada/british-columbia/story/2012/09... and many hard to believe promises of jobs and cost reductions in energy have come from the companies and even government. Check out the gasland documentary.

ck2• 14 years ago

All it took was $4 gas.

All the Saudis have to do is drop their price to the point where gas is $2.50 again and suddenly all the US companies go under in 12 months.

But think how much we'll save by having less than 10k troops in the middle-east someday.

dataminer• 14 years ago

I have come to the realization that oil prices do not translate directly to gas prices we pay at the pump. Even with a glut of oil, the gas prices at the pump depends on refineries which are controlled by the local companies. I think the $4 gas is the new normal. Also, the Saudi economy rely a lot on high oil prices so they wont dump more oil in the market.

joshuahedlund• 14 years ago

> oil prices do not translate directly to gas prices we pay at the pump

Technically true, but the correlation is usually very strong: http://www.gasbuddy.com/retail_price_chart.aspx?city1=USA%20...

Evbn2• 14 years ago

Gas prices increases follow oil price increases. Gas prices don't decrease much following oil price decreases.

simonh• 14 years ago

The Saudis and other oil exporters don't actually set the price of oil directly. OPEC have historically controlled oil prices indirectly by dialling their output up or down, but most producers are running flat out and have been for ages.

Saudi used to keep around 1.5m BPD production in hand to moderate supply disruptions and keep prices stable, but now they are running much closer to their maximum practical output capacity. Even if they opened all the taps and pushed forward more aggressively to bring more on line it would have a much more subdued effect than in the past. The days when they could materially affect prices on an ongoing basis are over.

Contrary to popular opinion $4 gas isn't really the producer's fault. Maybe they could get it down to $3.50 for a while (pure guess), but the idea they could just turn a spigot and gas would be £2.50 a gallon again is unrealistic.

mgkimsal• 14 years ago

also because it's not just about production - the value of the dollar fluctuates as well, what $2.50 bought you a few years isn't the same today, and won't be the same tomorrow.

s_henry_paulson• 14 years ago

Some might argue that won't always be a possibility, assuming it even is right now.

http://www.econbrowser.com/archives/2007/05/northern_ghawar....

EliRivers• 14 years ago

Since restrictions were removed on commodity speculation, a great deal (I'd argue the majority of the big spikes) of the price fluctuation in gas has very little to do with the oil producers and an awful lot to do with speculators. They would not be happy to watch the price drop so far and I expect they'd do something about it.

hooande• 14 years ago

Our increased production of oil is due to the new technology of fracking (fracturing the ground to get oil out of it). The situation is certainly not "We could have been fracking 15 years ago, but we didn't feel like it because Saudi gas was cheap". The energy sector is subject to the same process of technological advance that any other industry is. We came up with a new way to get oil out of the ground and figured out how to deploy it at scale. Saudi Arabia didn't have much to do with it. Gas could be selling for $2/gallon and people would still be tripping over themselves to get more of it out of the ground.

Secondly, the idea that we're keeping troops in the middle-east in order to get oil for ourselves is rather naive. There was nothing in the article about all the free oil that the US gets just because we have troops in Iraq. The different political factions there are fighting so hard over every drop of oil that there isn't any left for the iraqi people, much less the united states.

There are no conspiracies here. No international intrigues. Technology improved, so now we have more oil. The energy sector is about to go into a boom that's going to lift the whole country's economy.

khuey• 14 years ago

The reason that American troops are in Iraq is completely different from, say, the reason that the Fifth Fleet is in Bahrain.

rbranson• 14 years ago

Even if you ignore all the externalities, hydro-fracking is still much more expensive than traditional shallow well land drilling operations, and it requires higher oil prices to sustain them. The 8 massive oil fields in Saudi Arabia (as well as many of those in Venezuela) fall into the "easy oil" category.

It's true that technology has improved, but it's likely that with more price pressure to improve the technology, these innovations would have come sooner. In addition, fracking is more work, period. It requires more energy than traditional drilling, and while this can be incrementally improved, it's fundamentally a much more energy intensive process that can't just be "optimized away."

roc3• 14 years ago

To be fair: oil being fungible means that it doesn't much matter who gets Iraqi production or the direct profits from it. So long as that oil can be produced and sold by a regime not under international sanctions, it will increase market supply thus lowering price and giving the market a little more wiggle room to absorb supply shocks.

Which are goals much more in-line with American defense strategy in the region as a whole.

So while the view of our having invaded Iraq to steal their oil remains naive, it's hard to argue that the US receives no benefits from that oil being produced by a non-sanctioned (non-Saddam) regime.

gnaritas• 14 years ago

You can't currently frak $2 a gallon gas yet. It's the higher price that makes these new techniques profitable.

InclinedPlane7• 14 years ago

"There was nothing in the article about all the free oil that the US gets just because we have troops in Iraq."

Quiz: how many US troops are in Iraq right now?

artmageddon• 14 years ago

Isn't fracking terrible for the environment though? I realize that's not the point of this article, but it makes me wonder if we're setting ourselves up for even more ecological damage.

kaonashi• 14 years ago

Do those troops have more pressing engagements elsewhere? Or are they just going to be unemployed? To the extent that it's the latter, we really won't save anything.

drpgq• 14 years ago

I have to say I'm skeptical about this, although a Saudi Arabia decline in production could make it possible.

slurgfest• 14 years ago

Even if output reaches that level, exports won't because the US uses so much more oil than Saudi Arabia. As demand grows, the US can still be a net importer and still have the same problems related to petroleum reliance.

ry0ohki2• 14 years ago

The article addresses that, domestic use is down. We already export quite a lot of refined oil as it is to countries that don't have refining capacity.

InclinedPlane7• 14 years ago

The US was a net exporter of petroleum products in 2011.

kyledrake• 14 years ago

I think stopping the destruction of our planet's climate is more important than becoming oil independent and having cheap petroleum, personally. This is troubling news to me, I was hoping that peak oil would start people down the track of dealing with these problems.

deelowe5• 14 years ago

People are on track to deal with these problems (or at least are attempting to be). There are hybrid cars all over the place now, Tesla Motors is doing well as a company and there is a ton of research going into clean energy. These are just extremely difficult problems to deal with. In the meantime, the country can't just let society fail as a whole. The whole world would descend into chaos and war.

The US has to do something to protect the country and the economy. It can't allow itself to become wholly dependent on oil produced by enemies of the state in an inherently unstable region ran by crazy dictators and terrorists. So what do they do? They hedge and ensure the country can keep a seat at the negotiation table when things get tough. Given the size of the US and the dependance on trucks, rail, and shipping to move cargo, even rather small changes in the price of oil can drastically alter the economy.

kamjam3• 14 years ago

$4 a gallon is peanuts. Price of gas in Rome, Italy was 1.87 euro per litre when I was there in July. Per litre, not gallon!

So people get around town on little mopeds, motorbikes, small cars and a lot of SMART cars around as well. I agree there is a lot of forward momentum with hybrid/electric cars in terms on technological advancement, but the uptake in the US is abysmal. Just because you drive an electric car does not mean there is no CO2, that electricity needs to be generated from somewhere and unless that source is renewable energy then you are back to square one. But it's not just cars you need to think about: generation of electricity, airplanes, ships, cheap exports from the rest of the world... I remember reding a study a few years ago stating that shipping outputs a lot more CO2 than air travel. Also, ships use the cheapest, nastiest, left over fuel from the refinement process so ends up throwing our more CO2. http://www.guardian.co.uk/environment/2007/mar/03/travelsenv...

I agree the US probably feels like it has to do something, but constantly patching over the cracks is never really going to fix the problem.

It can't allow itself to become wholly dependent on oil produced by enemies of the state in an inherently unstable region ran by crazy dictators and terrorists.

Yes. Thanks for the insightful comments. I'll be sure to vote you in for president when you run for election.</sarc>

danielweber• 14 years ago

American cars are a teeny tiny part of world CO2 emissions. Whatever else their pros and cons, hybrids and Teslas aren't going to matter to global warming.

sigkill3• 14 years ago

When people talk of peak oil, all I see is solutions to oil-as-fuel problems. What about the other industries where you still use oil? Petroleum products are practically everywhere.

dmritard966• 14 years ago

Agreed. Nuclear has had a rough go of it as a result of Japan's problems (and vise versa to be fair) but in general it seems like electric cars and nuclear are our only real options to at least try and keep up with climate change. There are also some strong cases for cost reductions and safety improvements for new Nuclear facilities as a result of improved building techniques and more generic designs.

It is important that we be energy independent but I am totally disappointed at the lack of energy (minimal pun intended) for renewables and alternatives. In the presidential debates the bulk of energy conversation was dedicated to strutting thier oil and fossil fuel cred - hardly any other focus.

InclinedPlane7• 14 years ago

So you're a supporter of fracking then, right?

reportingsjr• 14 years ago

I interpreted the opposite; that (s)he is opposed to anything that makes fuel prices cheaper. This is the viewpoint that I personally hold. I would like fuel prices to go up and match the rest of the world as that would create a huge push towards much more efficient transportation technologies.

Of course it isn't that black and white as prices of commodities would increase, possibly decrease sales, etc, but it is an interesting thought that has been in the back of my mind.

yassam• 14 years ago

I agree (about climate) and I don't think we can wait for peak oil to hit before we start making much deeper cuts in emissions.

Bill McKibben in Rolling Stone shows that proven fossil fuel reserves are around 5 times higher than we can burn to avoid a very dangerous climate change (beyond the 2C guardrail):

http://www.rollingstone.com/politics/news/global-warmings-te...

More info here: http://math.350.org/

donohoe• 14 years ago

Wonderful - we'll be living in an oil rich utopia - right?

zrb0529• 14 years ago

@ChuckMcM is correct - this is an advertisement for fracking.

_delirium2• 14 years ago

It'll be interesting to see the extent to which this ends up being good or bad. In direct economic terms, most likely good: lower energy prices make some industries more competitive, and direct fuel exports (like any commodity export) are a source of income. On the other hand, technological advancements tend to come from constraints, so the U.S. could be setting itself up for 10-30 years of easy living on cheap oil/gas, but fall behind places like Europe, or perhaps even Asia, on R&D and production of more energy-efficient technologies, or other sources of power generation, which might eventually turn out to be important. Hard to say.

stephenhuey• 14 years ago

It's interesting that the IEA is also projecting 90% of Middle Eastern oil exports will go to Asia by 2035.

http://www.iea.org/newsroomandevents/pressreleases/2012/nove...

notatoad2• 14 years ago

Thee article seems to skip pretty quickly over what, to me, is the important point:

>Will transform the U.S. into the largest producer for about five years starting in 2020

So the us is going to start pulling it's oil out of the ground a lot faster. And then it's going to run out of oil. I think it might be better to just keep buying from the Saudis and keep a little bit in the ground.

Tyrant5053• 14 years ago

I always come back to this point as well. Buy till there is no more, use nothing till everyone has ran out.

ahallerberg• 14 years ago

Invest a little over a lot of time versus a lot in a little time since like the winner to me.

refurb• 14 years ago

But how does this help us? The oil market is international. If we wait until everyone else runs out of oil, then start drilling ourselves, we're still paying ultra-high prices for it.

Of course, unless you are suggesting we don't sell any of our own oil at that point. Sounds good in theory, until you realize that keeping oil product for domestic use (at say $100/bbl) leaves a lot of money on the table when you can sell it to another country for $400/bbl.

DougWebb• 14 years ago

Another argument against this approach is that North American oil sources aren't as easily extracted as Middle Eastern sources. Part of the transition to North American sources includes developing better extraction technology as these sources start to be exploited. That requires real experience and years of R&D. If we just ignored our sources until we became 100% dependent on them, we're not going to be able to extract them quickly enough or efficiently enough. We've got to build up the technology and infrastructure before we become dependent.

jobu• 14 years ago

Norway is highly regarded for it's approach to limited oil exploration: http://www.npr.org/blogs/money/2011/09/06/140110346/how-to-a...

Arjuna• 14 years ago

"So the us is going to start pulling it's oil out of the ground a lot faster. And then it's going to run out of oil."

This does not appear to be an entirely accurate conclusion, according to the article. For example, the article explains that:

"The desert kingdom is due to become the biggest producer again by 2030, pumping 11.4 million barrels a day versus 10.2 million in the U.S."

That said, if the numbers and projections are accurate, then the U.S. will still be producing, but the output will be lower, largely because of changes in the sources of energy:

"'In the United States, low prices and abundant supply see gas overtake oil around 2030 to become the largest fuel in the energy mix,' according to the report, written by a team of researchers led by Birol."

On the topic of running out of oil, I have always wondered (just a theory for discussion here): maybe oil will never physically run out, but rather what will happen is that once all of the easily-accessible supplies have been expended, it will simply become so cost-prohibitive to extract that we will eventually be forced to change and adapt. Hopefully we will change sooner than later. (Also, when I say "we", I mean all of us as humans, not a specific country).

Edit: Thanks for responding roc and checker. You gave me a further reading point (i.e., peak oil).

checker• 14 years ago

I believe your theory is essentially peak oil: When the price of extraction exceeds demand. Oil will still be there, but it would be economically unfeasible to tap, especially with the rise of alternative fuels.

roc3• 14 years ago

It's pretty well accepted that oil will never physically run out.

Long before even extraction/refining costs make remaining oil infeasibly expensive, supply/demand will send the price spiking to uneconomical levels as soon as oil production so much as slows down relative to growth in world-wide demand.

That's what the US increase in extraction is primarily about: trying to avoid price shocks between now and when the economy is, or can be, substantially run on natural gas and renewables as global demand outstrips supply. And even then, all we'll likely have done is smoothed the increase in price over the next 20 years.

Similarly, the increased CAFE standards are much more about lowering American dependence on oil, fleet-wide, than environmental concerns.

sigkill3• 14 years ago

Although this might be covered in peak oil, there's a specific term that you might find interesting. EROEI - http://en.wikipedia.org/wiki/Energy_returned_on_energy_inves...

Basically, if you need to burn one barrel of oil to extract one barrel of oil from the ground, then you have already lost. Here, "burn" is used very loosely and is an all encompassing term including electricity for workers, rigs etc. and also the physical petrol required for transport to the refinery and end customers. The cost obviously also includes the initial investment and factors in the life of the rig installation itself as well.

It seems that we're currently at an EROEI of 10:1 and it's declining pretty steadily (kind of obvious). The wiki article is pretty informative. And, a cursory search on reddit for the term "peak oil" also returns quite a few interesting results. Caveat Emptor though, since there are some loony conspiracy theories posted as well, so it's up to you to sift the wheat from the chaff.

patrickgzill• 14 years ago

If for some reason, coal to oil (synfuel or syncrude) were to be ramped up, it could be quite astounding. There are only trial runs at this point, however.

Germany during the WWII era was able to produce 75% of their oil needs due to synfuels. Once the plants were bombed or disrupted, Germany ran out of fuel and lost the war.

ccozan• 14 years ago

Not only trial runs. See this http://www.post-gazette.com/stories/business/news/south-afri... . This is a faciltiy that works, operated by Sasol. They plan to build a 80k barrel/day facility in China.

PS. noteworthy in the article is the mentioning of Obama, who was pushing for such a coal-to-oil technology to be brought to US.

edj2• 14 years ago

As other commenters have pointed out, the US only overtakes SA for a few years before falling behind again:

"By around 2020, the United States is projected to become the largest global oil producer (overtaking Saudi Arabia until the mid-2020s)"

So maybe that part of the story is overblown. But perhaps more interesting is that the US will supposedly become a net exporter shortly thereafter:

"The result is a continued fall in US oil imports, to the extent that North America becomes a net oil exporter around 2030."

Source: IEA World Energy Outlook 2012 - Executive Summary http://www.iea.org/publications/freepublications/publication... [PDF]

ojbyrne2• 14 years ago

US != North America.

edj2• 14 years ago

Good point. I didn't see that. When you throw in Canada's tar sands, it's a lot less surprising that North America could be a net exporter in <20 years.

grannyg00se• 14 years ago

I find these oil report news pieces to be incredibly lacking almost all of the time. First of all, this person is speaking predictions and postulations without showing a single piece of data. Not a good sign.

I'm very skeptical, because the net return on oil reserves has been steadily declining since the early 1900s. Shale oil is extremely expensive to extract/process and also relatively dangerous. The production cost ratio is less than 10:1 if I recall correctly, while in the early days of oil drilling the ratio was in the hundreds to one. You could pretty much poke a hole in the ground and have sellable oil gushing out with no further effort. Now it's a struggle to get just past the "economically feasible" point.

The tarsands in Canada are a great example of this. Currently they are sitting at a ratio of about 5:1. And that's also a very dangerous, and highly polluting extraction process.

Another problem is oil reporting is context. They'll throw out a number like 169 billion barrels of oil. That's the current reported bitumen content in the tarsands. Sounds huge. If you do the math, that's about five years' worth at current world consumption. Five years. For one of North Americas largest and most championed reserves. With the extraction ratio taken into account, we can slice one year off of that. And if the demand trend continues it's even less. I'm not convinced that a few percentage points of extra fuel efficiency in consumer vehicles is really going to make a significant dent in demand.

josefresco• 14 years ago

From the article: "Iraq will be the biggest contributor to new oil supplies, raising production to 6 million barrels a day by 2020."

So Iraq's oil is our (US) oil? Or am I misreading that statement? I guess they could be saying that overall Iraq will see the biggest jump of all nations? Not sure.

Nux• 14 years ago

By 2020 I hope there won't be so much need for oil (i.e. electric cars).

graeme• 14 years ago

Oil is a stock resource. There is a finite amount of it.

It is treated as a flow resource. Discussion focusses on annual production, rather than total extractable stock.

It is not impressive to run through a stock of resources at a faster rate.

jsilence• 14 years ago

Just a brief pointer that we are heading at 8,50$ per gallon in Germany right now.

wffurr2• 14 years ago

At $110 for Brent, all sorts of odd and difficult oil supplies will get developed. What's the net energy extracted for the economy to do useful work with, though? The energy (and dollar) cost of extracting oil shales and deepwater is enormous compared to the Kingdom's costs for their supergiant fields.

This is good news, if true, for the US' balance of trade, but sustained $100+/barrel oil will induce major structural shifts in our economy whether we're exporting or importing.

The EROEI (Energy Returned on Energy Invested) implications of these prices are even worse. At a certain point, the only reason to continue to drill is because it's marginally cheaper than the energy intensive task of creating liquid fuels from organic feedstocks (i.e. - ethanol). We'll have to have switch at that point to something else as the primary source of energy for our economy, but nothing else is even close to being ready.

I hope you're all ready to work like Joey Hess, netbook battery by candle light: http://news.ycombinator.com/item?id=4721645

prpatel• 14 years ago

awesome! this will let us save tons of money by not forcing us to invest in solar, wind or other sustainable sources of energy! DRILL BABY DRILL!

U.S. Oil Output to Overtake Saudi Arabia’s by 2020

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