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Has Hydrocarbon Production and Supplies Met 2003 Forecast?

We are in a very interesting point in history. The world has numerous options and technologies to provide energy. In the realm of hydrocarbons where are we compared to predictions made in 2003?

Where we were in 2003?
In 2003 there was concern about rapidly rising natural prices and short supplies. In his testimony to the Federal Reserve board dealing with natural gas supply and demand issues in 2003, Chairman Alan Greenspan of the Federal Reserve Board gave a testimony in June of 2003 that stated that very tight natural gas supplies had caused a sharp increase in natural gas prices. “Canada, our major source of imported natural gas, has had little room to expand shipments to the United States, and our limited capacity to import liquefied natural gas (LNG) effectively restricts our access to the world’s abundant supplies of gas. Given notable cost reductions for both liquefaction and transportation of LNG, significant global trade is developing. And high gas prices projected in the American distant futures market have made us a potential very large importer.”

In its annual Energy Review, the Energy Information Administration stated that crude oil imports were 9.65 million barrels per day and domestic production was 5.74 million barrels per day.

Where are we today?
What a difference a dozen years makes. Today natural gas supplies are plentiful due to shale gas development. A 2014 Wall Street Journal article stated: “The world is being remade. Britain, Germany and Spain recently repealed or rejected fracking bans. Now Russia’s energy power looks set to shrink and shrink even as Russia desperately seeks Western technology to develop its own vast shale potential.”

The New York Times reported on the natural gas boom when they stated: “The nation is awash in so much natural gas that electric utilities, which burn the fuel in many generating plants, have curbed rate increases and switched more capacity to gas from coal. Companies and municipalities are deploying thousands of new gas-powered trucks and buses, curbing noxious diesel fumes and reducing the nation’s reliance on imported oil. Companies like fertilizer and chemical makers, which use gas as a raw material, are suddenly finding that the United States is an attractive place to put new factories, compared with, say, Asia, where gas is four times the price.”

As stated in an article about United States oil production by USA Today “spurred by the use of hydraulic fracturing or fracking in shale rock deposits, U.S. oil production has jumped from 5.0 million barrels per day in 2008 to 7.4 million last year and is expected to average 8.5 million this year and 9.3 million next year, according to the Energy Information Administration (EIA), the analytical arm of the Department of Energy.”

Crude Oil in Storage
Prior to 2003, North Dakota was not a household name when considering states with significant oil production. Now, only Texas produces more crude. The crude oil that was locked up in the Bakken shale is now flowing due to the combination of horizontal drilling and hydraulic fracturing. The Wall Street Journal reported in March of 2015 that “U.S. crude oil supplies are at their highest level in more than 80 years, according to data from the Energy Information Administration. Producers worldwide are pumping 1.5 million barrels per day more than the world needs.” Even though substantial new storage has been built since 2009, storage is filling up fast. Crude oil is being stored in tanks, underground salt caverns and leased tankers. It is against the law to export U.S. crude, which leaves few alternatives, other than to store any excess.

The market signals of 2003 indicated there was a real need to find new, affordable energy in this country. American ingenuity and technology have tremendously increased hydrocarbon supplies and reduced prices, totally changing the energy picture that was forecast.

For more information about oil and gas development, see the Michigan State University Extension oil and gas information page.

Source: Curtis Talley Jr, Michigan State University 

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