Surging shale oil output will allow the U.S. to topple Russia and Saudi Arabia as the world’s top crude oil producer, according to a Wednesday report from research firm Rystad Energy.
Rystad predicts that the American energy providers will ratchet up crude oil production by 10 percent to about 11 million barrels per day, the report notes, making 2018 the first time in more than 40 years that the U.S. out-gained Russia and Saudi Arabia.
A huge expansion in shale oil development is the primary reason for the gains, a Rystad researcher told CNN shortly after the report was published.
“The market has completely changed due to the U.S. shale machine,” said Nadia Martin Wiggen, the firm’s vice president of markets.
The report could mean the end of Russia and the Organization of the Petroleum Exporting Countries (OPEC) in a longstanding battle to prevent American shale producers from gaining an edge in an already glutted energy market.
U.S. oil production slipped slightly during Saudi-led price war in late 2015 aimed at reclaiming market share lost to shale and other players. Russian and OPEC’s decision to overproduce crude caused oil prices to plummet from $100 per barrel to a low of $26.
Domestic output plateaued at 8.55 million barrels per day in September 2016, down nearly 12 percent from its peak in 2015, according to the U.S. Energy Information Administration (EIA). But the prices recovered quickly in 2016, thanks to technological improvements that made it easier and cheaper to frack.
Solid demand and a slow and methodical winnowing of the market’s enormous supply glut are two of the primary reasons for the oil industry’s recent good fortune — OPEC and Russia’s recent decision to dial down their pumping helped lessen oversupply. The move helped stabilize the market, but, in turn, could allow the U.S. to jockey ahead in the race for energy domination.
Catapulting past Saudi Arabia and Russia, two of the biggest energy producers in the world, could help bolster Trump’s pledge to usher in an era of “American energy dominance.” The president vowed to reduce environmental regulations to make the U.S. more competitive on the global stage.
Rystad Energy downplayed the effect deregulations had on the price uptick. “I don’t think it’s had a significant impact,” Martin Wiggen said of Trump’s efforts to roll back Obama-era regulations.
Having a president in the White House who doesn’t promise to destroy the fossil fuel industry only helps buoy the industry’s market position, he concluded.
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