Oil falls as U.S. could overtake Saudi Arabia in production

The World is Falling Apart!

Wow, I miss one day and the world falls apart! Yesterday I was honored to speak at Loyola’s Women of Wisdom event and when my speech was over my voicemail was overflowing. It seems that every time I miss a day some catastrophe strikes the world.

The petroleum sector got smashed for a multitude of reasons. Everything from fears of a Chinese’s slowdown to concerns over Europe and a world without quantitative easing himself, Ben Bernanke. Not only were there rumors making the rounds, that the Fed Chairman would quit, the increasing possibility of a Romney presidency has the prospect for QE Infinity come to an end, as Governor Romney has said that he would appoint a Fed Chairman with a different economic philosophy that includes a strong dollar. A strong dollar of course would decrease commodity prices and the lack of cover from the Fed would keep hot money flows into emerging markets. That could slow-down China and hurt demand more despite today’s uptick in Chinese manufacturing.

That of course makes today’s Fed announcement interesting even though not much change is expected from a Fed with a possible lame-duck chairman. It is possible that other Fed Governors sensing Blood in the water may try to start to assert their independence and try to score points with what could be a new administration. At the same time the markets were making news on the big picture stuff, like predictions that the US would be producing more oil than Saudi Arabia and natural gas creating an economic boom, which is exactly what I was telling the ladies at the Women of Wisdom Conference. Part of my speech was as follows:

The topic of energy of course is hotter now than it has ever been! With wildly fluctuating gas prices and consumers crying foul the Presidential Candidates have made energy a very big part of this upcoming election. I know that sometimes when you watch the debates and listen to all of the reports on energy, and you fill up at the gas pump, it become extremely frustrating to get a handle of what is going on in the energy industry. It becomes difficult because in energy there have been so many myths and misconceptions on what drives energy prices.

We hear politicians blame the oil companies! They are not paying enough taxes! Or they blame the speculators for driving up the price! Yet the truth of the matter is the oil companies and the speculators are not the problem! They are the one creating the solution! The truth is that the hopes for the United States economy have never been higher. Despite the doom and gloom of recent years we are living in a historic time unlike anything that we have seen for generations or perhaps since the early days of oil! In fact, it is being called a revolution! A shale gas and oil revolution! We are at the very beginning of a new era in energy that will reinvigorate our economy and lift us out of this depression. It will create jobs and investment opportunities for years to come. Imagine if you had a time machine, and you could go back and invest in the early days of the industrial revolution, or the early days of Standard Oil and how much money you might have been able to have made? Well you don’t need a time machine because we are there now! We are on the verge of new frontier! A historic time that is going to change our country! A time where we will no longer be dependent on foreign oil but will become an oil exporter! We are on the precipices of this new era not because of some government program, but because high energy prices and the desire to make profits, we have built a better mouse trap!

Sure enough as on cue the AP Reported that U.S. oil output is surging so fast that the United States could soon “overtake” Saudi Arabia as the world's biggest producer. Driven by high prices and new drilling methods, U.S. production of crude and other liquid hydrocarbons is on track to rise 7% this year to an average of 10.9 million barrels per day. This will be the fourth straight year of crude increases and the biggest single-year gain since 1951. The boom has surprised even the experts. The Energy Department forecasts that U.S. production of crude and other liquid hydrocarbons, which includes biofuels, will average 11.4 million barrels per day next year. That would be a record for the U.S. and just below Saudi Arabia's output of 11.6 million barrels. Citibank forecasts U.S. production could reach 13 million to 15 million barrels per day by 2020, helping to make North America "the new Middle East." The last year the U.S. was the world's largest producer was 2002, after the Saudis drastically cut production because of low oil prices in the aftermath of 9/11. Since then, the Saudis and the Russians have been the world leaders

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