Oil production in the US and why politics is at the heart of future development 1
Catalyst 1
Summary 1
Caveat: 2
Since completing research for this report, the BP Gulf of Mexico disaster has raised important issues 2
Table of Contents 3
Table of figures 4
Analysis 5
Total US production has declined in every year since 1985 (with two modest exceptions in 2000 and 2007) 5
Forecasts suggest that developments in the Gulf of Mexico could abate the decline 5
US domestic production has been declining for over 20 years, with little hope of reversal 5
US oil production has halved since its peak. While important, the Gulf of Mexico is a minion next to Lower 48 6
Lower 48 production fell heavily from 1965 to 1990, but stabilized, whereas Alaska has barely lasted 30 years 7
Onshore oil production is no longer the powerhouse it used to be, as shale gas steals the attention 7
Until the OCS is developed, offshore oil production will depend upon the Gulf of Mexico's deepwater regions 8
US offshore oil is an underdeveloped resource: its future depends on changes in the regulatory framework 9
However, imports comprise two-thirds of national consumption 10
US imports have been on a continual rise since domestic production hit a major downturn in 1985 10
The US is adapting its import policy to reflect changing patterns in oil supply and demand 10
US decisions are not confined to US needs: they reflect changing patterns in global oil trade dynamics 11
The US oil deficit is a major issue 12
2013-21 will be testing years as the government struggles to ensure energy security 12
Since 1985, the largest US suppliers have easily covered the region's falling production 12
Risks associated with import dependency are myriad and the US has experienced too many of these 12
Forecasts suggest that imports will not be so stretched by 2030 13
In the short term, the US needs to reduce demand; however, by 2030, supply and demand should be better matched 13
Transportation will be by far the largest user of oil for the foreseeable future, and further growth is predicted 14
Passenger vehicles comprise the majority of the US fleet, although vans and small lorries will make inroads 15
Despite its unpopularity, fuel-efficiency has been the determining competitive feature of the US auto sector 15
The effect of fuel-efficient cars on the transport sector's oil consumption could be dramatic 16
The likely effect of the arrival of diesel on the US can be examined using the experiences of Europe as a reference case 16
The transport sector's oil consumption is localized, with the five highest-consuming states using 35% of transport oil 17
The key states' attitudes to transport will dictate their future energy intensity 18
Although diesel remains a small part of fuel consumption in New York, it accounts for all growth in fuel consumption 19
Diesel/hybrid could set New York apart from the US and inspire faster gasoline reduction than seen in Europe 19
A Democratic administration will not neglect the climate to meet this deficit 21
The opening of parts of the OCS will be balanced with investment in nuclear and wind 21
The Democratic Party is on the verge of great things in the energy sector, but will it help the oil deficit? 21
Oil import reduction will not ensure energy security, although the OCS will give more time to find a solution 21
The combination of the Democrats' OCS policy and demand reduction will see imports fall 22% by 2021 22
The impact of wind and nuclear on the oil industry 23
A Republican administration will solve the deficit with little regard for climate 24
All Alaskan and OCS moratoria will be repealed and controversial oil and gas shale will be exploited 24
The Republicans have rarely compromised with fossil fuel skeptics and the next election will be no different 24
Republican policy will only work for one term, making 2016 the crucial year: if they lose, their plan is redundant 24
With the help of Canada, Republicans will solve the oil deficit if they win the 2012 presidential election 25
However, if the Republicans do not win until 2016, the picture looks very different 26
Regardless of which plan is implemented, some major hurdles still need to be overcome 27
Deepwater drilling is difficult and potentially uneconomic 27
Recent discoveries in the Gulf of Mexico mean oil will come from 'ultra-deep' waters 27
Although current technology will not allow all ultra-deep fields to be developed, this is likely to change soon 27
Shale gas will attract huge investment and may put pressure on the industry's available skilled workers 28
US refineries may struggle to meet US quality standards if Canadian imports keep growing 29
Can the US refining sector cope with weak prices, aging infrastructure and heavy, sour, Canadian oil? 29
Conclusion: the US oil deficit should be resolved by 2021, so long as policy makers do not clash over key issues 30
APPENDIX 31
Ask the analyst 31
Datamonitor consulting 31
Disclaimer 31
List of Figures
Figure 1: Domestic oil production versus domestic consumption (1965-2030) 6
Figure 2: US onshore production by region (1965-2030) 7
Figure 3: US offshore oil production by region (1965-2030) 8
Figure 4: US crude oil imports: major countries by volume (1973-2008) 10
Figure 5: Domestic production and top seven import regions, as share of total consumption (1973-2008) 12
Figure 6: Domestic production and top seven import regions, as share of total consumption, forecast to 2019 13
Figure 7: Transportation sector by type of vehicle (2001-07) 14
Figure 8: Transportation sector by type of vehicle (2001-07) 15
Figure 9: Transport oil consumption by state versus share of population, 2009 17
Figure 10: Diesel versus gasoline consumption in New York, 1980-2007 19
Figure 11: US oil production, including President Obama's OCS fields 22
Figure 12: US oil production if Republicans win the 2012 election 25
Figure 13: US oil production if Republicans win the election in 2016 26
Figure 14: Offshore production by depth of well (1965-2030) 27
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