We hear a lot about the shale oil boom in this part of the country where, to the surprise of many coming in from out-of-town, gasoline prices are relatively inexpensive at around $3 a gallon (see this item from last week and GasBuddy’s heat map for more on this). This Globe & Mail story about the shale oil boom (that also extends into Canada) touches on some of the other ways in which North American and global energy markets are diverging.
Some analysts believe the growth in production in North America will continue to exceed market expectations and will swamp the mid-continental region with oil, driving down the benchmark U.S. crude, West Texas intermediate, and forcing Canadian producers to accept steep discounts on WTI prices.
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Combined with lower demand and increased biofuel production, growth in oil output has resulted in a reduction of U.S. imports to 8 million barrels per day at the end of 2011, from 13 million barrels per day in mid-2007. Imports as a percentage of U.S. demand dropped to 45 per cent last year, from 60 per cent in 2005.
In recent report, Citigroup analysts forecast that additional tight oil production could add as much as 3 million barrels per day to U.S. supply by 2020, with the Gulf of Mexico output climbing by another 2 million barrels per day.
In addition to North Dakota’s booming Bakken, more production is expected in Texas’s Eagle Ford and Permian Basin, Colorado’s Niobara, Louisiana’s Mississippi Lime, Ohio’s Utica and the Monterey basin in California, a state that the U.S. Energy Information Administration estimates could hold 15 billion barrels of recoverable reserves, several times greater than the Bakken.
Energy companies are wished good luck in their attempt to begin fracking off the coast of California, though, with the state’s budget situation as it is, maybe it’s not as far fetched as it once was. The Citigroup report went so far as to say that the theory of “peak oil” is now dead, an idea that is more believable when realizing that there are Bakken oil formations in many other parts of the world – not just here in North America.
![[Most Recent USD from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_usd_en_2.gif)
Citi, on its own merits, failed in 2008 (and that wasn’t the first time it needed a bailout).
It is a political entity that clearly knows nothing about banking. For some reason, you think they have credibility on energy?
If Citi makes a prediction about which member of Congress is going to be bought off next — we should listen. But on the economy? Come on.
Citi belongs in the history books alongside GM, GE, Bethlehem Steel, all the airlines, etc. But for Washington corruption, that is where they would be
Yeah, what’s up with shootin’ the messenger?
Did Citibank start charging you for your checking six months ago and you just noticed?
Not trying to defend “citi” as an institution. However, there are great analysts even in bad banks. I think that if WTI gets over $110, it’s a great short just like it was last year. Demand destruction is happening right in front of us while cheap supplies will increase.
For those pinning all their hopes on the shale oil boom, I have just one piece of advice: don’t quit your day job.
Most of the people moving to North Dakato to work didn’t have a day job to quit!
And in a few months, they’ll be in the same boat.
Yeah, but they can make some good money in the meantime and save. Also, those booms usually last a few years at least, I don’t think it’s over in a few months. Look at natural gas boom in Wyoming. That was really good for 5-6 years at least.
Hi Tim
Re: “peak oil” is now dead, an idea that is more believable when realizing that there are Bakken oil formations in many other parts of the world”
I actually looked at that Citigroup report. They spend very little time discussing shale reservoirs outside the United States. That’s not to say there aren’t many “Bakken Shales” elsewhere, but I’d say the jury is still out on that one. Citi’s report was based almost exclusively on the U.S.
Even worse — much worse — is that the report does NOT distinguish between natural gas liquids (condensates), which are mostly used as feed stocks for the the petro-chemical industry, and crude oil, which is refined into transportation (and other) products we use. The Citi report refers to both together as “oil” or “liquids.”
Peak oil is about the peak of CRUDE oil production. You know, the Good Stuff, the most energy dense fossil fuel. If we refer to “liquids” we can also throw in corn whiskey, palm oil, and the vegetable oil that powers Willie Nelson’s bus. Gas liquids are fine — we get propane, butane, etc. from them — but are not a substitute for crude oil.
When people refer to “oil prices” they are referring to CRUDE oil prices, not gas liquids prices. Gas liquids production does not affect the oil price.
– Dave
I don’t know if anyone really has a great model on “peak oil”. My guess is that over long term, efficiency that we are introducing into machinery and car engines will cut oil demand more than the increase in Asian drivers would add to it. Just a guess, but I bet that the manufacturing industry is 30-40% more efficient in ten years if these prices keep up.
Interesting. I hadn’t read the report itself but have seen multiple news stories about it in recent days, none of which addressed the shortcomings you noted. I guess that shouldn’t be surprising.