"Shale Boom to Turn U.S. Into World's Largest Oil Producer, Watchdog Says"

Water Cooler
#1

http://online.wsj.com/article/SB10001424127887323894704578114492856065064.html

Seems highly speculative, but I thought this was interesting. This agency predicts that US shale oil extraction will be “faster-than-expected”, and will make the US the world’s biggest oil producer by 2020. Since the US will use less foreign oil, the role of world police of oil regions will fall to Asian countries.

#2

I remember hearing about this five years ago (“It’s imminent!”).

But more interestingly, I wonder what that would do to geopolitics. If it happens, this ought to be highly disruptive to the Middle East.

#3

As long as OPEC stays united and the US continues to use more than it produces, being #1 won’t make much of a difference.

#4

Also, oil demand is growing! Even without the US, growth in China, Indonesia, India, and other countries will ensure that that OPEC has a steady stream of customers for a long time. Actually, the article mentions this indirectly. They say that OPEC world market share will still increase, presumably as demand grows and oil fields in other countries are depleted.

#5

  • Not just middle east, but Russia as well.

  • Should help strengthen the dollar (but not by much)

  • This should force the oil producing nations to start looking for other allies (Likely China, India, Turkey, and Indonesia).

  • Negative for Israel. (This is not obvious, but due to subtle changes, I think it is bad for Israel). Basically what I think is all US-backed nations will be down a notch in terms of power.

Long HCLP?

It is surprising they say US will be the largest producer and not Canada. Don’t have any insight into why though.

#6

^ I believe Canada already produces a lot more than it uses and most of its exports are to the US. I’m guessing that there would not be a lot of incentive for them to increase production unless they develop export relationships with China. I think Canada is also way behind the US in production right now, so they would have to increase production significantly just to catch up.

These are all just guesses on my part though, could just be geology.

#7

Interesting they think oil will be at $125 a barrel in 2030. That’s not too far away from today’s price.

#8

Western Canada exports roughly 2.0 million bbls/d into the United States. The vast majority of those exports land in PADD2 (The US Midwest). Canadian crude represents approx 97% of total PADD2 imports each year. The issue for Canadian producers is that Canadian crude competes with US production in the Bakken for refinery demand, causing Canadian crudes (e.g. WCS) to be discounted to WTI at Cushing.

Just like the States are seeing huge production growth out of the North Dakota Bakken and the Texas Eagle Ford plays, Canadian production is growing from unconventional shale and (you guessed it) oil sands plays. Yes, the US produces more Oil than Canada per year; and it is speculative to say that the US will be the largest producer in the world by 2020. What will push the US to more production is energy independence and decreased refinery demand for premium-priced waterbourne crudes (e.g. Brent).