Okay, so U.S. oil output is growing so quickly, at its highest rate in 60 years according to the Associated Press, that the United States is primed to surpass Saudi Arabia as the world's biggest producer, a spot we have not occupied since 2002? With high prices and new innovations in drilling, crude production is at pace for a 7 percent increase. That would bring production to around 10.9 million barrels a day. Part of me thinks that it's a damn shame this news didn't break while George W. Bush was president, then we could break out punchlines about invading ourselves.
But wait, wouldn't increased production according to higher demand result in more supply, and thus naturally drop the price in line with most common rules of economics? It would if it were anything else on the planet except for crude oil. And when I hear another report on how we should be catching a break at the pumps for the extended time being due to more stations using winter blend gas, I have to fight the urge to rip the radio out of the car.
Energy Department predictions place U.S. crude production just a hair under Saudi Arabia just next year, and Citibank is estimating up to 15 million barrels a day by 2020. By comparison, Saudi Arabian output for next year is forecast at 11.6 million barrels. While 15 million barrels a day is good, in the here and now the U.S. uses 18.7 million barrels a day. Even with the squawking about growth in domestic production and improving fuel efficiency (ha), at what point will these rosy predictions meet the demand and break even/create a surplus? A surplus would make a price decrease a hell of a lot easier, instead of the penny a day drop for a week, followed by a 36 cent sucker punch.
With the new advances in production technology and increased demand in developing nations, we haven't seen a significant drop in prices, but the usual chatter is there about higher domestic production and decreased importation giving the economy a boost. Sure, if you own stock in an oil company. I do...not that much, but I'll definitely be looking to change that. I would tell you which, but I don't write a stock tips blog.
The major problem resides with the presidential election, a mere eleven days away. It doesn't matter which mainstream candidate wins, neither are my guy, and either way you slice it, we're boned. Obama will put the kibosh on anything he can't throw a hollow $500 million at, and Romney would probably put forth the drill. While increasing domestic drilling will spur economic growth, like it has in states like South Dakota, I can't help but think if Romney was president, the next oil well disaster won't even get half the lip service the Gulf did. Deregulation can be a funny thing like that, and I don't doubt for a second the former Massachusetts governor wouldn't help out the industry. Say what you will about Mitt Romney, but the guy knows how to make a profit.
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