Oil consumption is booming
Four years since oil’s collapse and oil is back to $60 a barrel and more, and production is surging. A global energy watchdog says booming production in the United States will meet 80% global growth in demand for oil over the next five years.
While scores of exploration and production companies went bankrupt and more than 200,000 American energy industry workers lost their jobs, some producers figured out how to reduce costs and boost efficiency.
The retreat by oil producers during an oil-price plunge between 2014 and 2016, however, continues to raise the specter that not enough money has been spent on exploration, which can result in shortages and price spikes.
Now, with oil back to $60 a barrel and more, production is surging, and the world has in some ways been turned upside down. The United States is rapidly becoming a significant world oil and gas producer. Led by shale oil companies that adopted innovative technologies, America will likely surpass Saudi Arabia and rival Russia as the world’s leading oil producer this year.
The IEA predicts that within five years, the cushion of production capacity over expected demand will fall to its lowest level since 2007. That was the year that the price for oil in the U.S. surged close to $150. Prices are less than half that today.
The energy agency, which advises energy-consuming countries, said Monday that global energy demand will grow about 7% by 2023, to 104.7 million barrels of oil per day. Citing the production capabilities of drillers operating in U.S. shale fields, the world capacity to produce oil will hit 107 million barrels a day.
Opportunities for applying technologies that bring down costs and boost productivity are still enormous. Until just recently, the industry has been decidedly slow to adopt new digital technologies, due the large profit margins during when the price and demand for oil was higher.
The high prices and demand made new approaches and innovation a low priority; the primary challenge was production. Then, when prices crashed most companies were more focused on cutting their capital spending than innovation. The same pattern also seemed to hold true across manufacturing industries in general. However, more and more companies are beginning to embrace technology and innovation, and many new improvements have been made as a result.
With the increase in oil demand, it important to embrace a true all-of-the-above energy policy by allowing for more leasing, exploration and development of potential U.S. offshore oil and natural gas resources. New technology has made obtaining oil safer and more efficient than ever. Opening up more areas to offshore exploration and development, would result in economic activity and energy production that would do great things for our nation.
A federal energy policy that takes full advantage of all domestic energy sources including continued offshore development in the Gulf of Mexico and expanded access into new areas of the eastern Gulf of Mexico, Alaska, and Atlantic will help keep the U.S. energy renaissance going.
Robust domestic energy policy will support stable energy prices, help meet the anticipated rising energy demand, bring in additional government revenues and strengthen our energy and national security.