The United States likely surpassed Russia and Saudi Arabia to become the world’s largest crude oil producer earlier this year, based on preliminary estimates in EIA’s Short-Term Energy Outlook (STEO). In February, U.S. crude oil production exceeded that of Saudi Arabia for the first time in more than two decades. In June and August, the United States surpassed Russia in crude oil production for the first time since February 1999.
Although EIA does not publish crude oil production forecasts for Russia and Saudi Arabia in STEO, EIA expects that U.S. crude oil production will continue to exceed Russian and Saudi Arabian crude oil production for the remaining months of 2018 and through 2019.
U.S. crude oil production, particularly from light sweet crude oil grades, has rapidly increased since 2011. Much of the recent growth has occurred in areas such as the Permian region in western Texas and eastern New Mexico, the Federal Offshore Gulf of Mexico, and the Bakken region in North Dakota and Montana.
The embedded charts in this article tell an important story of renewal in the US onshore domestic supply market versus the relatively stagnant supply growth in both Russia and Saudi Arabia.
The big question for economists is as the USA draws ever closer to undeniable energy independence, at what price will oil represent a headwind to growth on aggregate? The oil producing states will obviously benefit but the high population non-producing states will face headwinds. Therefore, it is reasonable to conclude that a level in the region of the $65 to $80 is close to idea where fracking is economic but prices are not an impediment to growth.
West Texas Intermediate has paused near $70 and will need to continue to hold the $65 if potential for continued higher to lateral ranging is to be given the benefit of the doubt.