Should $100 oil be forgot?

Should $100 oil (NYMEX:CLG14) be forgot and never brought to mind? Oil made one last attempt to go above $100 a barrel but backed off as we end the year. It was a year that saw a surge in U.S. oil production and record natural gas (NYMEX:NGG14) production. The shale revolution is starting to dawn on the general public this thing is for real. The real hero of the U.S. economy in 2013 was the U.S. energy industry that single handedly helped inspire an economic comeback. Forget the Fed and the politicians in Washington, it was that fact that, according to the Energy Information Admiration, domestic crude oil and natural gas production is expected to continue to rise for many years. The EIA expects U.S. crude oil production will average 7.5 million bbl/d in 2013 and 8.5 million bbl/d in 2014. In 2016, crude oil production is expected to be close to the historical high of 9.6 million barrels per day, a record set in 1970…While domestic crude oil production is projected to level off and then slowly decline after 2020, natural gas production grows steadily, with a 56% increase between 2012 and 2040, when production reaches 37.6 trillion cubic feet. U.S. crude oil production could climb to 10 million barrels per day by 2040 under certain conditions, according to the U.S. Energy Information Administration. Propane production hit an all- time high. These are the type of numbers that spurs imagination and creativity and economic growth. 2013 is a year when people started to realize that the U.S. could achieve what many thought was a pipe dream of energy independence. 2013 was a year when people started to believe that the era of high gas prices may be ending. These are the type of things that I said would happen last year and the year before and many scoffed at the notion. They are not scoffing any more.

Not only that, the energy industry in 2013 also can be credited with steps towards cleaning the air. On 2013 energy-related carbon dioxide emissions fell last year to their lowest level since 1994, with the biggest emissions drop coming from coal. That should do even better in 2014 as the switch from coal to gas is exceeding expectations. President Obama's Climate Action Plan will accelerate coal plant retirements and shift an even larger share of power generation to natural gas-fired capacity. Energy companies are expected to add about 55,000 megawatts of gas-fired plants by 2020, according to a Reuter's survey of major utilities and power producers. That is about 20,000 MW more than current government estimates.

2013 was a year when gas prices reversed the trend of going higher each year and are now starting to break. Midway through the year the average retail price of regular gasoline was $3.65 per gallon on Monday, July 29, 15 cents per gallon higher than a year ago, according to EIA at that point. The average regular retail gasoline price for all of 2013 so far remains 1% down from the average price over the same period last year. Over Thanksgiving gas prices were 14 cents less than a year ago, and the lowest heading into a Thanksgiving holiday since 2010. 

And this revolution has only begun. The EIA says that estimated shale oil and shale gas resources in the United States and in 137 shale formations in 41 other countries represent 10% of the world's crude oil and 32% of the world's natural gas technically recoverable resources, or those that can be produced using current technology without reference to economic profitability. More than half of the identified shale oil resources outside the United States are concentrated in four countries--Russia, China, Argentina and Libya--while more than half of the non-U.S. shale gas resources are concentrated in five countries--China, Argentina, Algeria, Canada, and Mexico.The United States would be ranked second after Russia for shale oil resources and fourth after Algeria for shale gas resources if compared with the 41 countries assessed.

So thank the U.S. energy industry not only for 2013 but for the good thing that they will bring us in the New Year! Happy New Year!

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

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