“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

Perry - Cato Oil Gas Exports 2014.pdf

1. Statistical Review of America's shale revolution. • Oil production. • Natural Gas Production. • Natural Gas Prices. 2. The economic case for oil/gas exports.

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