Fox news recently released a brief video detailing how the U.S. has erased its energy deficit. America is now the top producer of petroleum and natural gas and has doubled its output over the past four years. Troy Eckard, CEO of Eckard Global, has his thoughts and insights into the video and the future of U.S. energy below.
U.S. energy market video
“I started my career in 1985 and the U.S. had just come off a major oil embargo that highlighted the absolute vulnerability of the United States’ energy markets. It also showed our increasing demand and our lack of supply, or even our ability to meet short term interruptions in supply.
In 1999 through 2006, natural gas prices set new records as the world started pushing for cleaner energy, and the cleanest hydrocarbon being extracted was. Quickly, it became a reality that the United States had major reductions and limitations in natural gas supplies which sent gas prices from a price of about $1.65 per MCFG to right at $15.00 per MCFG.
In 2003, oil prices began to rise as it was clearer than ever the U.S. appetite for crude oil was only getting stronger and we were running out as daily output numbers plummeted. In fact, in 2008 oil output dropped to a level not seen since 1941 of less than 4 million barrels per day while we were consuming over 18 million barrels per day.
Unfortunately, reality is that money, or economic prosperity, drives solutions. Frac jobs and horizontal drilling were implemented and perfected for gas shale plays once gas prices rose enough to support that method of extraction. Thus, the shale revolution commenced focusing on natural gas being extracted from shale formations from Texas to Pennsylvania.
Crude oil prices rose to new highs in the summer of 2008 to over $140 a barrel! This historic rise in prices compounded with historic demand and a new low in over 60 years for daily output, sent exploration companies out in record numbers drilling for oil. The oil shale plays mirrored the boom that had previously occurred for the natural gas shale revolution. Now came the oil revolution which started major trends such as the Bakken and Eagle Ford shale plays.
The exploration success and efficiency of shale drilling for crude oil took the U.S. back up to output numbers that were near this country’s all-time high in less than four years. Thus, the global markets for crude oil were oversupplied by nearly 2-3 million barrels per day, all due to new output from the U.S.
Then, global chaos in both gas and oil prices had all producers thinking – “is the economy stupid?!” No matter how much you produce, discover or extract, it boils down to demand and how well the customer’s economy is doing. Global economic meltdown in 2009 was due to an industry price correction for hydrocarbon producers, market competition, and artificial supply manipulation that falsely tried to dictate the market shifts.
The video we shared states several critical facts:
Fact #1 – The U.S. doubled its output in less than four years. Where would we be if OPEC had not artificially intervened with oversupply? Probably at 12 million barrels per day, or more, and down from the 34% import numbers we see to about 20% import numbers for crude oil.
Fact #2 – We are a net exporter of natural gas and will be for a century. We have not even scratched the surface of the reserves that are present in shale plays around the country. Thus, extraction is operationally plausible and only driven by prices paid for with extracted gas to determine the threshold of extraction in various formations.
Fact #3 – Oil output and prices pertaining to the United States has changed so much more than energy itself. It is, and will affect our defense strategies going forward. It will, and has changed our world role in peace and commerce as the U.S. uses domestic production to pay down its debt, repatriate dollars, and to work with other countries based upon economic decisions.
Fact #4 – The U.S. is just about to be one of the largest producers of crude oil on Earth! If you are wondering why so many oil producing countries are falling apart, and are at unstable, their basis for economic survival is eroding. The regimes that govern them are unable and unwilling to adjust their decades of oil addicted, revenue sources to know what to do, how to control civil unrest, and what direction they take absent capital provided by selling the U.S. crude oil.
Fact #5 – The U.S. is in uncharted territory. We do not know how we will be effected long term under this new scenario. We do not know how our global role will be positioned as we deal with massive shifts in economies. The U.S. will need to continue to support domestic exploration and development in order to provide a stable global transition, and allow our own government a chance to figure out the New World Order from an energy prospective.
Stimulating thoughts. Statistically, I think we have an oversupply 0f crude oil today. However, I honestly believe the global disarray and constant threat of supply interruption holds well for supporting prices north of $45 a barrel, and even close to $60 a barrel, in mid to late 2018.
Natural gas has found its ceiling and floor with highs around $3.65 an MCFG and lows at $2.25 an MCFG, with short-term dips possible on either side of that range. I believe oil prices have a range of $42.50 to $60.00 a barrel, with a slight potential of short term dips on either side of that range. I see the downward side of crude oil prices more likely short term than the high side range being breached.
In 2017, we have a whole new market with a forward direction that will last through my lifetime. Its an exciting time to be involved in the oil and gas industry and I have a positive outlook for U.S. energy.
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