This page has been archived and commenting is disabled.
Crushing The U.S. Energy Export Dream
Submitted by Arthur Berman via OilPrice.com,
Exporting crude oil and natural gas from the United States are among the dumbest energy ideas of all time.
Exporting gas is dumb.
Exporting oil is dumber.
The U.S. imports almost half of the crude oil that we use. We import 7.5 million barrels per day. The chart below shows the EIA prediction that production will slowly fall and imports will rise (AEO 2014) after 2016.

This means that the U.S. will never be self-sufficient in oil. Not even close.
What about the tight oil that is produced from shale? That's included in the chart and is the whole reason that U.S. production has been growing. But there's not enough of it to keep production growing for long.
Here is a chart showing the proven tight oil reserves just published last month by the EIA.

Total tight oil reserves are 10 billion barrels (including condensate). The U.S. consumes about 5.5 billion barrels per year, so that's less than 2 years of supply. Almost all of it is from two plays--the Bakken and Eagle Ford shales. We hear a lot of hype from companies and analysts about the Permian basin but its reserves are only 7% of the Bakken and 8% of the Eagle Ford.
Tight oil comprises about one-third of total U.S. crude oil and condensate reserves. The U.S. is only the 11th largest holder of crude oil reserves (33.4 billion barrels) in the world with only 19% of Canada's reserves and 12% of Saudi Arabia's reserves.

In other words, the U.S. is a fairly minor player among the family of major oil-producing nations. For all the fanfare about the U.S. surpassing Saudi Arabia in production of crude oil, we are not even players in reserves. What that means is that we may temporarily pass Saudi Arabia in production because it chooses to restrict full capacity, and U.S. production will fade decades before Saudi Arabia's production begins to decline.
Let's put all of this together.
- The U.S. will never be oil self-sufficient and will never import less than about 6 million barrels of oil per day.
- U.S. total production will peak in a few years and imports will increase.
- The U.S. is a relatively minor reserve holder in the world.
How does this picture fit with calls for the U.S. to become an exporter of oil? Very badly. For tight oil producers to become the swing producers of the world? Give me a break.
Perhaps we should send congressional proponents of oil export like Joe Barton (R-TX), Ted Cruz (R-TX) and Lisa Murkowski (R-AK) to "The Shark Tank" TV show to try to sell their great idea to the investors and judges.
- 16229 reads
- Printer-friendly version
- Send to friend
- advertisements -


Well duh!
Don't state the obvious. The sheep may panic.
That's all from Davos, now back to you on Sesame Street Guy Smilie
Regardless of your kicking and screaming, the US is on track to become a major energy exporter in under a decade.
Majority of Americans will stop consuming energy.
as said agaiiiiiiiiiiiiin, they try to bend others for low pricing, but it cannot be sustained, or just for one reason, cheap oil for huge war when most bottom price is achieved, which i do not believe to.
consider :
1) ww3 within 5 years.
2) venezuela serious incident before 2016
3) mid east serious incident bef.... hey wait a second !
We pay half our citizens to sit at home and get fat off welfare, unemployment, disability and food stamps while contributing nothing to society other than vote "democrat" once every four years. The list of stupid things we do is endless at this point.
"We pay half our citizens to sit at home to get fat off welfare, unemployment, disability and food stamps while contributing nothing to society other than vote "democrat" once every four years. The list of stupid things we do is endless at this point."
Actually, they, the banksters and their violence-puppets, governmnet, destroy and loot the economy which destroys opportunities for work, businesses, capital, etc. This produces the welfare recipients that they then "support" with loot stolen from you, and the rest of us. Of course the REAL reason for welfare is to enable the criminals to skim off the flow of stolen loot for themselves before handing over a share to one of their victims.
In other words, focus on the self-benefiting destroyers and thieves, not their victims.
And: Who does more destruction? The man being supported by stolen loot, or the pols, crats, and funcs that are also supported by that same loot?
The banksters need to repay us.
Kill all the welfare recipients, and they'll make more. Kill the thieves that fund welfare, and welfare will cease to be.
Most revolutions make things far worse for most people in both the long term and the short term.
"Most revolutions make things far worse for most people in both the long term and the short term. "
With respect, but while I respect your decision to live within their fences, and to pull their plows until you are worth more to them dead, that is not my choice for me or mine.
I wish to live before I die.
The banksters need to repay us.
“Life is slavery if the courage to die is absent.” - Seneca,
that's why they decide to do nothing when they realize " whatever i do, result is the same " and tv shows gain season n+1 every fucking year.
I've voted Democrat every 4 years most of my adult life, and gotten zilch for it. Worse, the damned Republicans buy the vote in every non-Presidential year.
Where do I apply for this subsidy everbody is talking about? I got no food stamps, no Obama phone, no disability, I got sheeeit.
Sign me up already. I want moar free stuff.
"We" don't necessarly do them, but they are done with our money in our name, Why god invented rope.
Gold is up, silver is up, Oil..., not off the lows. Life is better. Not good, but better.
How did you get 4 down votes?
Our social welfare system is bankrupting our country. You can't confiscate enough wealth to pay off all of the hollow promises.
No problemo... We will simply have a direct swap with Venezuela:
They give us their Gold, Oil and Beauty Queens, and we give them Toilet Paper, Soap and Tampons. That appears the evolving strategy, judging by the news.
Seriously though... Of the Top 10 Proven Reserves countries, 8 of the 10 are in the US back pocket. Iran and Russia are the exceptions, therefore the prime targets.
A man with a plan;)
Don't forget the breast impants, they're short of those in VZ too.
Does silicone count as 'oil' in the export statistics?
Hmmm.
Seems to me like "entertainment".
We don't actually use what we import now. It gets refined into gasoline, diesel fuel, jet fuel and other distillates and we export a lot of that. It is not "we the people" that need crude imports, it is the refiners who have more capacity than the U.S. actually needs.
Gasoline use peaked in the U.S. in 2006, and has been slowly declining since.
ZH is the only site I know where the idea that the end of QE caused oil's collapse has been mentioned (by the sharpest commenters). The lamestream media meme that it is cratering demand or the Saudis is absurd. QE created a huge oil bubble which is now collapsing. Stocks to implode next.
How so? QE dollars went to Exxon Mobile? I thought they went into the vaults of the too big to fail banks.
Through what mechanism did QE prop up the stock market? Answer that, and you have the answer to your question.
(Issuing bonds)
Gotcha. Thanks
Fucking A right!
I gotta laugh sometimes. I was trying to get into a discussion with a friend of mine a couple of months ago [who, BTW, is balls deep in the stock market, &, in general terms, a 'successful' dude].
I was trying to explain the concept of FED balance sheet expansion to him [which, as you can imagine, was like I was speaking Martian].
So anyway, I shifted gears and tried to bring home the point another way. I said ~ "OK, so you've seen gasoline prices come down radically recently. Explain to me WHY that is the case". He gives me the typical MSM garbage about how the SHALE BOOM is so great & it's having wonderful effects on the economy. I just laugh and say "REALLY"?. Then I proceed to tell him about:
- Failed Syrian pipeline maneuvers
- BRIC currency initiatives
- Petrodollar destabilization
- Russia
- Ukraine
- The Saudis
- Paper Contracts
- la la la
Naturally, his eyes roll over [& in the end we just have to laugh about it, otherwise we won't be FRIENDS anymore].
So now ~ months later [with crude prices WELL below what they ever were then]. And ~ with article upon article about SHALE OIL producers facing bankruptcy & having to shutter their operations because their production is not 'PROFITABLE' below certain levels].
So now I ask him. "OK ~ so if your premise was that oil prices were low because you wolfed down the BS that SHALE OIL was the elisir, how is it possible that low oil prices, now, represent a FAILED BUSINESS MODEL for all the shale oil production that was brought online and that you were told to believe was answer"
I'm still waiting for an answer on that one. I'm thinking "Dancing With the Stars" might work its way into that narrative.
BECAUSE OBAMA!
Wake up.
Drill Baby Drill and shale oil and gas production was the answer to getting the prices lower. You must believe that the Saudis really are friendly muslims who just wanted to give the world a price break from the goodness of their hearts. Lowering prices by Saudis has just been a Muslim form of share the wealth?
The energy markets are now competitive markets. Drill Baby Drill and keep it that way.
Sure, if the drilling is paid for with investors' capital. It wasn't. It was funded by artificially low interest rates (inflationary theft).
Actually, much of it was paid for by oil revenues being recycled back into more wells.
The problem now of repayment is not because of no reserves or lack of production capability from those wells. It is because of declining price as a result of Drill Baby Drill. Interest rates had very little to do with it. A well pays back in 18 mos. at $100 oil with anything remaining as profit. Does it matter if the rate is 6% or 10% for a loan that amortizes in 18 mos?
"A well pays back in 18 mos. at $100 oil with anything remaining as profit"
BWAHAHAAHAHAHAAH comment of the day on ZH.
Good luck with that Jimmy Dean
Heh, Gomer the Goober,
You know nothing of the oil and gas business, it is obvious.
Yes, wells did pay back the drilling costs in less than 18 mos. with $100 oil.
There is more brain power in a package of that Jimmy Dean sausage than between your ears.
You comment shows that you are the Dumbass of the Day on ZH.
To Augustus: Yes, obviously it matters whether the rate is 6% or 10%, because $100 oil is now a fantasy. The interest rate determines what you can sell the oil for and still make a profit.
The decisions were made when it was not a fantasy, less than six months ago.
Are you now extremely rich because you went short oil at $100 because you are an oil expert?
At $100 oil the interest rate had very little to do with a drilling decision.
The real problems the E&P companies have now is not from the drilling decisions. The problems result from the accumulated acreage positions they built up with the financing and in that case the rate does matter. Those leases that they acquired were high cost and generally have excessive royalty rates. Those purchases could only become profitable by investing in developing the reserves by drilling. Now that is not possible. And those leases usually require annual payments to keep them in force.
He's awake. you're not. ZIRP invited the cap ex expansion that otherwise NOT have occurred were interest rates something more than 0.15%. The contribution that shale Marcelus and Bakken plays make to overall supply is marginal relative to total world production. Moreover and to this end, this isn't a pyhsical market clearing problem - like one that you might see in say barley that was sumped in the fall onto the elevators settling at $120/tonne in October, only to see now that that physical excess has cleared and now barley trades at $195/tonne in less than 3 months. In barley's instance, it was a movement along the demand curve. However, in oil's instance - it is a demand problem - paricularly on the industrial usage side. Quantity demanded at ALL prices has fallen. this constitutes a shift in quantity demanded (or a movement along the supply curve). And this is a much deeper and structural econommic problem than it is a problem of simply clearing temporary excess supply's physical market.
The capex expansion resulted from PROFITS from drilling wells.
As Haliburton once advertised, "Good Wells make Good News."
There are several thousand independent oil and gas operators in the US. They each make their own drilling decisions. The metric most used to evaluate the public companies was how much did production increase. They all competed to be the one to give investors the most satisfaction. It did not matter if rates were 2% higher. The wells were extremely profitable at $100 oil.
Barley had the demand problem. There was not enough demand at harvest time so price was lower and it paid to store. Did low financing costs from QE cause a farmer to plant a larger barley crop? Or did the farmer look at all alternative crops to decide which was likely to make the most profit. If barley futures had been at $80 a tonne for the harvest season, would there have been less barley planted? With the barley commodity, as with the oil commodity now, the market can change. Bumper crop because of weather means low prices. Poor yields because of disease means high prices. The point is that some farmer will be there to plant barley again when the situation look good for prices. And when it does look good for prices, will it matter if the interest rate on the loan to finance planting is 5% or 8% when it will be repaid in less than 9 mos. The farmer problem arises when they pay high prices to incerase the land during those really good times and finance that. then when they are barely breaking even on the original crop land, how do they payments on the new land that is also only barely breaking even on planting costs?
The oil problem is that supply has grown from many sources, not just from unrestrained US development. Iraq is up about 500,000+ bbl a day. Iran is producing more. Libya is back on line about 50%. Russia is producing more. US is up about 2mm bbls a day over the last couple of years. Even with all of that increase the oversupply is about 1,000,000 bbl a day. Demand can easily pick that up with Chinese and Indians deciding they can afford to take the Sunday drive. when the middle eastern suppliers decided to declare war on the high cost producers it was a great surprise to all other oil producers. We all know that they could generate more revenue producing 80% as much at $100 rather than 100% at $50. so, who would forecast that they would make that decision?
Financialization of oil caused a bubble in oil. QE ended it by lowering interest rates to zero, making the cost of financing new oil supplies extremely low. The end of QE would end cheap oil if QE ever ended. But behold, the interest rates just keep dropping. The FED is making noises about higher interest rates, but Japanese QE continues, ECB QE is just getting started, and Chinese QE is massive (albeit unacknowledged) compared to everybody else. Hence, cheap oil will get cheaper.
High PROFITS caused a increase in oil supply. Interest rates had little to do with drilling decisions. If you believe that low interest rates were the determining factor then producers should be drilling more wells, not fewer.
We need MOAR green energy taxes to fix the problem
FRNs are green. We can burn them to stay warm.
That's funny because I was unaware we actually HAD any substantial green energy taxes. I must've missed that one. Just like Obama confiscated all the guns. I must've missed that one, too.
The same taxes that we are paying that go to the Federal Financing bank which funds the special green energy projects...
With $2.00 gas green poops are dead. Where is b-cups when we need her
I see that you have not cried the mandatory amount of tears for dear leader today. Please do so immediately.
Your assuming by my post I support green energy taxes or Barack Obama.
Good one, I support neither.
I was merely pointing out a fact to the above poster. The fact you inferred anymore is your problem.
I do love how you compare Obama to one of the last true communists left on earth. That is fucking hilarious. Obama, a communist? He's the right of Reagan, Nixon! and Eisenhower in almost every meaningful way.
But, yes, carry on spouting your nonsense assumptions.
Oh, I do hate guns, though. That part is true. Guns are for pussy-ass losers who can't solve their problems like a real man.
You know why guns were invented? Because a bunch of pussies kept losing fights and wars so they turned to fight with guns so they could at least save their ass, even if it was in the lamest most dishonorable way.
If by "right" you mean neocon - then perhaps. But right of Reagan et al on economics and less government intrustion?.....nuuu uhhh. Nuu uhhh means - NOT EVEN CLOSE.
Another good one.
Ronald Reagan was the first American president to spend money through a fan whilst not in a recession or war. I believe govt spending peaked at 27% under Reagan, as well.
The main reason the economy didn't completely collapse in the early 80's under Volcker's rate hikes was because Ronnie spent money through a fan.
You know how Obama catches mad hell per Beghazi? Reagan had one of those every six weeks for 8 years, and did absolutely nothing. He makes Obama look like Ghangis.
Again, keep thinking Ronnie was some "severe" conservative.
Only two years left to buy guns before Obama confisticates them. Get 'em while they last.
What's up with Kuwait ? They depegged their Dinar from USD . How's their economy ?
They know something Chinese related, no doubt.
A nation Kuwait 1) having oil 2) depegged from usd to control inflation is still living in peace that too in Middle East . Funny isn't it ?
Thank God we can always annex Canada.
We'll need that oil come WWIII, unless it's nuclear.
Tyler respectfully, you're predication is based on current valuations. How can you possibly predict future demand?
Based on 'Central Bank' capital allocation globally, I'd like to hedge some gold against Nat Gas.
Think about how the derivatives markets would price that risk? (with current lending terms)
I should start a hedge fund/
But when you're a clinically diagnosed psychopath that is willing to go "long" on risk with stunts like, this, this, this or this.
In your mind you can make anything a remarkable achievement and success!
When the central bankers destroy the market, it's lamented for the evil that it is.
But when Uber applies market principles, or the Feds consider allowing oil exports (a free market), it's somehow terrible?
These are some seriously incompatible, manic ideological swings. Some of you boys would do well to read Henry Hazlitt's Economics in One Lesson.
It is just like asking if food prices would be lower if there were no grain exports.
No exports means lower prices until the next crop is NOT planted. Price increases bring on more planting and supply.
Now we have lower gas prices until the next well is NOT drilled. Higher prices will put more rigs on location making hole. Drilling a well is not controlled by the seasons either.
"Let's put all of this together.
Um, wrong, semi-right, and agreed.
The "U.S." will be "oil self-sufficient" as soon as this deflationary collapse proceeds to the point that oil use comes into line with real expectations, that is, when it has become more important to have water, arable land and draft animals, rather than magical machines wholly dependent on extraction of finite resources. Further, we will definitely import less than 6 million bbl/day. The former may take some time/war/famine/pestilence to equilibrate, but the latter may happen far faster than most folks want to think about.
U.S. oil production WILL peak, although I posit that the peak occurs THIS year, as the debt deflation eviscerates the domestic oil production (cf. Schlumberger & Baker Hughes), not in a few years, and imports WILL increase, but only temporarily (see above).
Yep. It's been that way for well over 50 years.
U.S. imported no oil in 1850, yet somehow we survived. I predict, with great confidence, that in 2050, we will not have a net import of oil. Somehow we will survive. People are great that way. They do what they have to do.
export that oil and gas
EU is waiting for it to get free of RU
UE is waiting for it to get free of RU
come on guys build those LNG terminals, ships etc etc
the world is waiting to be saved by the exceptional amis.
LMAO
So all of US shale oil can supply US oil needs for less than two years (10 billion barrels). And all of US oil reserves are enough for just six years (33.4 billion barrels). Just six years.
The US is now importing 7.5 million barrels per day. And all of Saudi Arabia's exports are 6.5 million barrels a day.
So oil is too expensive at $47 a barrel and is headed towards $20. Short oil here and you will be rich. Goldman says so. They are so sure that oil will fall below $40 a barrel.
This article and it's graphs aren't rep·re·sen·ta·tive of demand. Everything is postumous.
Demand is slowing, costs are decreasing. The cost of borrowing is INCREASING!
And what's "demand" again?
Sorry, I couldnt resist with the wonderful speech coming up tonight.
At current usage rates we have what 55 years left based on proven current reserves. Why panic yet :) right?
The US is a net exporter of refined petroleum products, so it stands to say a lot of the 5.5 billion barrels can be saved if we stopped exporting refined products. It also means that a large percentage of the oil consumed by the United States is not for use in the United States. Other countries export their oil to us to recieve refined products in return.
The line of reasoning in this piece only makes sense if one thinks all oil is the same. It is not. A large amount of US refining capacity is set up to refine heavy oil which made sense pre-frack when such refining capacity was built. Frackers produce light oil and condensate (ultra light oil). Many US refineries simply cannot efficiently process large volumes of light oil. So it does make sense to export light oil to refineries that can efficiently use it and import heavy oil (like heavy Canadian via Keystone XL) which refiners can efficiently use.
Heavy oil refineries can generally process light oil, but not vice versa. But yes, it is a matter of letting the market find the best efficiencies, rather than the whole thing being dictated by government fiat.
There's nothing wrong with allowing exports, especially if it is more economically efficient to export. It would probably make more sense to convert the California refineries to Canadian feedstock and export Alaskan production to Japan/China, than it would to export Canadian production to China/Japan. The 'export ban' is just economically stupid and innefficient from that perspective as it may artificially drive up costs and reduce network efficiency. The rest of the article, namely, that the US is never likely to be again a net exporter, is otherwise well written.
This is as stupid as saying the US shouldn't export cars and trucks because it imports cars and trucks, idiotic.
Did they really put "Proven Reserves" and Saudi Arabia together?
Can someone send this to the EFFING MORON's at FAUX NEWS? They continue especially that Ass Wipe B.O'Retardlly to spout that U.S. is an oil exporter. Now technically we do re-export oil products due to our excess refining capacity but that is NOT because we have a freaking surplus of production. I get that crap all the time from my family members that think B.O'Retardlly is the second coming of intellect. On second thought I will forward myself. Perhaps if enough of us send it they will actually learn something....prolly not though....
will crush the Canadian banks as more exposed to the effect of low oil prices and bursting real estate bubble:
Read here more on valaution of the top 2 Canadian bank:
http://prudentvalueinvestor.blogspot.com/2015/01/v-behaviorurldefaultvml...
The Canadian banks are just fine. Most of their RE loans are backed by CMHC subprime mortgage insurance.
Prudent, thanks for the link. Have you looked at BMO?
You must remember that 10 years ago shale provided 0 years supply because we did not know how to get to it.
Technology and inginuity will go alot further than you think.....
But net exporter of oil - probably never.
Net exporter of energy....
We are dam neer there now.....
I do believe we produce a little over 85% of our total energy needs with 2012 data.
"BHP cuts shale investment amid crude crash"
http://www.ft.com/intl/fastft/264592/bhp-cuts-shale-investment-amid-crud...
"BHP Billiton is implementing cuts to its shale oil production and cutting the number of rigs it operates onshore in the US by 40 per cent due to the slump in oil prices."
"This will reduce the number of rigs it operates to 16, down from 26. BHP's drilling programme will be focused on its higher quality liquids-rich Black Hawk acreage."