Fact of the Day: North Dakota Oil Production Approaches OPEC Member Ecuador's Level
BLOOMBERG -- "Surging crude output in the Bakken shale formation is set to make North Dakota a bigger oil producer than OPEC member Ecuador. The CHART OF THE DAY above tracks North Dakota’s production, which has almost doubled in the past two years, as Ecuadorean output has stagnated."
14 Comments:
The next chart should probably be the one that shows Alaskan output Declining from approx. 2,000,000 bbl/day to 500,000 bbl/day.
Or, of course, there are always charts of E. Texas, and/or California.
Why aren't oil prices dropping more?
"Why aren't oil prices dropping more?"
This article explains some of the reasons why, including geo-political concerns and increasing demand from developing countries.
Oil prices are set on the MYMEX or Brent by speculators. Since demand for oil is inelastic in the short- to medium-run, speculators can control the price of oil for several months to possibly a couple of years at a time, by aggressive position-taking, and the planting of scare stories in blogs and the media.
The identities of speculators is cloaked, and may even represent sovereign wealth funds, such as those of Russia. Indeed, it would be unpatriotic of Putin not to try to game prices higher.
in the long run, demand falls when oil crosses $85 to $90, while all sorts of supplies begin to make sense, or substitution. For the long run, that is probably the ceiling on oil, and even at that price oil will be used less and less.
If oil-producing nations such as Iraq, Iran, and Venezuela come back on stream, we will see gluts, almost at any price. Global demand is around 83 mbd, and those three nations alone can probably produce 30 mbd.
Natural gas is being discovered seemingly everyplace.
Actually, the International Oil Markets, as exemplified by Light Louisiana Sweet are within pennies of where they were a month ago.
The movement in WTI is just a function of a lot of the Bakken Crude being sent West, South, and East by Train to escape the bottleneck at Cushing.
Globally, oil prices are on a rising trend because the World, basically, peaked in output in 2005
Couple that with a Global economy that is trying to expand, and, wah la.
This is an "economics" blog, right?
bunny-
give the cloak and dagger speculator idiocy a rest.
the oils markets are too big to corner without someone noticing.
further, what do these speculators do with all this oil you imagine they are buying?
where could they store such a quantity?
your febrile imaginings of shady cabals running up prices are just as foolish and baseless as they have always been.
and how do these alleged speculators profit?
that which is bought must also be sold. if they are buying enough to drive prices up, then how are they going to sell it without driving prices down and having lost money on storage costs in the interim?
regarding why oil prices are not dropping more, you have to realize that world oil production is always a function of price.
saudi oil is very cheap to extract. it's maybe $2-5/bbl.
north dakota oil is MUCH more expensive, maybe $60-80/bbl.
north sea oil etc can get even pricier.
tar sands? fuggeheddabouddit.
the clearing price for oil winds up being the cost to produce for the last bbl of marginal demand.
finding lots of new, high cost sources of oil does not really drive prices down, because if prices fell, it would no longer be economic to produce such oil and the supply would be shut off.
additionally, rufus has a good point. despite the huge boom in ND, taxas and alaska continue to decline dramatically. US production as a whole is not going up.
add to that the implosion of venezeulan production due to chavex, declines in mexico due to chronic underinvestment, low production from iraq, etc coupled with big demand from emerging economies, and bingo, you have a big price hike.
if there were to be a military incursion into iran, whoo doggie, you'd see some big hikes.
Mark,
Let's assume ND can increase the production to 1m barrels / day, twice as much as they do now. Let's also assume they can keep their production flat, so no decline if the 'easy' oil is gone.
With 4.3 billion barrels of recoverable oil that's 12 years of oil production.
The US consumes some 20m barrels of oil per day, from which 2/3 is imported. Even with an additional 1m barrels per day, the US would still be addicted to foreign oil.
1m barrels of oil per day is a lot and should not be ignored but it would make only a small bump on the production curve but not much more.
Richard: According to the
EIA , net oil imports are down to 46.3% for 2011.
The identities of speculators is cloaked, and may even represent sovereign wealth funds, such as those of Russia. Indeed, it would be unpatriotic of Putin not to try to game prices higher.
Russia can drive prices higher by cutting production. It does not want to play games in the futures markets because the American exchanges are great at stealing money from all investors.
saudi oil is very cheap to extract. it's maybe $2-5/bbl.
This is no longer true. When the Arab D formation of Ghawar was just starting to yield its oil it was very cheap to extract. But those days are long gone and the marginal fields in Saudi Arabia need $60-$80 a barrel to be economic. I bet you that is one thing that the people at CERA or the IEA are not really discussing in public.
Mark,
Thanks for the link, and you are right that the US no longer imports 2/3 of its oil. (memo to self: don't quote from memory)
However, if I look at the data, the US produces about 1.8m barrels per day more since the low point in 2005 which is very positive. But at the same time, the imports have fallen with 3.8m barrels.
So it is not only the rising production that has caused the US to reduced imports but especially the reduced consumption with about 1.9m b since its peak in 2005
So I am not so sure if the US imports less oil now because the production is higher or because consumption is lower.
Anyhow, just my 2c
However, if I look at the data, the US produces about 1.8m barrels per day more since the low point in 2005 which is very positive.
But is it positive? When you have production coming from activities that consume capital it is better not to have that production at all. If the US subsidizes biofuels that subsidized production is not a great benefit to the American taxpayer.
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