“Boom to Bust? How Export Restrictions Imperil America’s Oil and Gas Bonanza” Cato Institute Policy Forum February 10, 2014 by
1. Statistical Review of America’s shale revolution • Oil production
• Natural Gas Production • Natural Gas Prices 2. The economic case for oil/gas exports
Combined US production of gas and oil in 2013 was just short of the record in 1971 and is on track to reach new record highs this year and next year. Shale revolution reversed a gradual four-decade decline in just six years.
US Production of Natural Gas and Oil, 1949-2015 50
Estimate
Quadrillion BTUs 44.85
45
America's Shale Revolution
40 35 30 25 20
Carpe Diem Blog
Source: Department of Energy
1950
1960
1970
1980
1990
2000
2010
US more energy self-sufficient in 2013 than any year since 1987 US Energy Production as a Share of US Energy Consumption, 1987 to 2013 (Through October) 88% 84.7% 84%
80%
76%
72%
68% Carpe Diem Blog
Sou rce: Departm ent of Energy
1990
1995
2000
2005
2010
2015
US oil output in January (8.1M bpd) was the highest in more than 25 years, and output is on track to a new record high in 2015
12
US Crude Oil Production, January 1920 to December 2015 (est.) EI A Forec ast
10
8
A m erica's Sh ale Rev olu tion
Barrels per day (Million s)
6
4
2 Carpe Diem Blog
Source: Departm ent of Energy
0 1920
1930
1940
1950
1960
1970
1980
1990
2000
2010
Oil output increased 1M barrels per day in 2013, the largest annual increase since beginning of US commercial oil production in 1859 “Biggest economic story of 2013” Change in Annual US Crude Oil Production, 1860 to 2013 1,200
1,000s of barrels per day 2013 I nc rease of 1M bpd
800
400
0
-400 Sou rc e: EI A
1875
Carpe Diem Blog
1900
1925
1950
1975
2000
Texas oil output doubled in last 2.5 years to 2.8M barrels/day in Nov., highest output since 1980 and is now >36% of US oil. As a separate country, Texas would be 9th largest oil-producing nation in world. Texas Oil Production, January 1981 to November 2013 2,800,000
Barrels per day
2,400,000 Oil Output Doubled between May 2011 and November 2013 2,000,000
1,600,000
1,200,000
800,000
Source: EIA
1985
Carpe Diem Blog
1990
1995
2000
2005
2010
The US now has three super-giant oil fields, out of only ten ever worldwide, to produce 1M bpd at peak production
1,400,000 1,200,000
Oil Production: Permian Basin, Eagle Ford and Bakken January 2007 to February 2014 (est.) Source: Energy Inform ation Adm inistration Barrels per day Perm ian Basin May 2011
Eagle Ford May 2013
1,000,000
Bakken Dec . 2013
800,000 600,000 400,000 200,000 0 2007
Carpe Diem Blog
2008
2009
2010
2011
2012
2013
2014
Record-high natural gas production in the US at the end of 2013 28% increase since 2005, mostly from shale gas US Natural Gas Production, 1936 to 2013
35,000,000 30,000,000
Million s of Cu bic Feet A m erica's Sh ale Rev olu tion
25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0
Source: EIA
1940
1950
Carpe Diem Blog
1960
1970
1980
1990
2000
2010
Marcellus - largest nat gas region – output is at an all-time high and has doubled in less than 2 years, increased 8X in 4 years
16,000,000
Marcellus Natural Gas Production January 2007 to February 2014 (est.) Sou rc e: EI A
Carpe Diem Blog
14,000,000 12,000,000 10,000,000
Million cu bic feet/day Ou tpu t Has I n c reased ~8 X in Fou r Y ears
8,000,000
Output Has Doubled in Less T han 2 Years
6,000,000 4,000,000 2,000,000 0 2007
2008
2009
2010
2011
2012
2013
2014
$16 $14 $12
Monthly Real US Spot Price for Natural Gas January 1994 to January 2014 Per Million BTUs in 2013 dollars
$10 $8 $6 $4 $2 Carpe Diem Blog
Sou rc e: EI A
$0 1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Compared to US, Natural Gas Prices are 3X higher in Europe and 5X higher in Asia, South America World Natural Gas (LNG) Prices, November 2013 $20 Source: Federal Energy Regulatory Com m ission
$16
Per MM BTUs 15.3
14.7
15.6
15.6
15.6
13.7
$12 10.4
10.7
10.9
$8
$4
3.2
Carpe Diem Blog
rg en tin a
A
or ea K
Ja pa n
hi na C
ra zi l B
In di a
Sp ai n
K U
el gi um B
U
S
$0
US Exports of refined petroleum products have doubled since 2008
US Annual Real Exports of Refined Petroleum Products, 1994 to 2013 $90 $80
Billions of Constant 2009 Dollars
$70
US exports of refined petroleu m produ cts h av e dou bled in th e last 5 y ears
$60 $50 $40 $30 $20 $10
Source: US Departm ent of Com m erce
$0 1994
1996
1998
2000
2002
Carpe Diem Blog
2004
2006
2008
2010
2012
2014
Economic reasons favoring increased exports of natural gas and crude oil 1. Free markets/free trade argument. Objections to exports are pure rent-seeking 2. Restrictions on exports are outdated and based on an era of “resource scarcity” – we’re now in an era of “resource abundance. 3. Environmental