The United States that surpassed Saudi Arabia in oil
production has now beaten Russia in oil and gas production, thanks to the
fields falling in the category of shale.
According to a report released by BP on Wednesday, U.S. oil
production rose to a record last year, gaining 1.6 million barrels a day. Gas
output also climbed, putting the United States ahead of Russia as a producer of
the hydrocarbons combined.
The data confirming emergence of the U.S. as the top driller
also endorses a trend that has helped the largest economy of the world reduce
imports, caused a slump in global energy prices and shifted the foreign policy
priorities of the country.
The world is witnessing a changing of the guard of global
energy suppliers and the implications of the shale revolution in the U.S. are
profound, this was stated Spencer Dale, Chief Economist of BP.
The other major shift BP report shows is that energy demand in
China is growing at the slowest pace since the Asian financial crisis of the
late 1990s as the economy slows and the country tries to reduce its reliance on
heavy industry.
The boom in oil and gas production in the U.S. has started
to change the domestic economy profoundly. Cheap fuel has seen manufacturing
return to the U.S. as the country produced about 90 percent of the energy it
consumed last year.
Last year, energy imports by the U.S. equaled one percent of
GDP, of the country. In 2007, prior to the commencement of the financial crisis,
energy imports by the U.S. accounted for about half of the current account
deficit of 5 percent of GDP.
Shale drillers from Exxon-Mobil to Chesapeake Energy have spent
about US$120 billion last year in the U.S., more than double the amount five
years earlier. The surge in output and a slowdown in global demand have pushed
crude oil prices down about 40 percent in the recent past.
The lower prices will force some producers to shut in
“frothy activity” at some shale fields in the U.S. but most output can work
even at current prices. The number of rigs drilling in shale fields are down by
half from an October 2014 peak and may stabilize by the end of the summer, says
BP Report.
The shale revolution hasn’t run out of steam in the U.S. as
the country increased oil output last year, helping it to overtake Saudi Arabia
as a crude producer. This was the first time a country has raised production by
at least one million barrels a day for three consecutive years.
Among other producers outside the Organization of Petroleum
Exporting Countries (OPEC), Canada and Brazil also reported record production
last year, prompting OPEC’s policy shift of ditching price support for
defending market share.
On the demand side, countries outside the Organization of
Economic Cooperation and Development (OECD) accounted for all of the net growth
in global consumption of 0.8 million barrels a day, or 0.8 percent, last year.
Chinese consumption growth, though slower, still jumped 390,000 barrels a day,
the biggest increase in the world.
Tail Piece: Having achieved self sufficiency in energy products is likely to shift the U.S. focus away from Middle East and MENA to South China Sea. This may not be a good omen for the region as some other countries may try to declare themselves regional super powers, the mostly likely being Iran and India.
