Energy

America’s Next Oil Boom Will Be Even Bigger

(REUTERS/Andrew Cullen)

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Andrew Follett Energy and Science Reporter

Oil prices are set to rise again due to growing foreign demand, which could set the stage for another American oil boom built on the infrastructure of the first fracking boom, according to an economist who works on energy issues.

“Even with China’s economy slowing, global oil use will still rise by 1.3 million barrels a day this year—equal to the peak daily output of the entire Bakken Shale field,” Mark Mills, a senior fellow at the Manhattan Institute, wrote in a Wall Street Journal oped Monday. “Middle-class automobile ownership in Asia is rising steadily, from today’s average of 60 to 80 cars per 1,000 residents toward the West’s 600 to 800 cars. All the fundamentals point to growing demand for oil.”

“Shale 2.0, when it comes, will be even better,” Mills wrote. “The technology is advancing at a speed usually associated with Silicon Valley. Over the past half-decade, average output per rig has risen at least 400%. Productivity rose 40% last year, despite cost constraints. The rigs are getting cheaper, and the efficiencies brought by the latest tools—from data analytics to robotics to advanced materials—have yet to be deployed.”

Mills believes that today’s low prices may be worse for major foreign oil producers like Russia, Venezuela, Brazil, and Iran than for America. These countries require the price of oil to be above $80 a barrel to balance their national budgets. However, industry experts at RBN Energy ]believe most new American oil production will be profitable at around $40 a barrel. Such a set up means that the price of oil will be essentially permanently locked in at prices favorable to America.

The price of oil has fallen more than 70 percent since the summer of 2014 due to the actions of the Organization of Petroleum Exporting Countries (OPEC) and a surge in American oil production from hydraulic fracturing, or fracking. Despite today’s historically low prices, some analysts see a price spike in the future, which could create a huge American oil boom.

Other oil experts like Harold Hamm, the CEO of energy firm Continental Resources, believe that the price of oil will double to $60 by the end of 2016, which would pave the way for an American oil boom.

All this speculation should be taken with a grain of salt however, as only a few years ago forecasters and analysts at Business Insider were suggesting that oil could hit $300 a barrel.

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