I’ve been sharing the slow reduction of US oil output as oil drilling counts fall during the last few months. Now production has finally fallen below last year’s level. While petroleum fuel inventories remain very high, lower output should tighten them in the months ahead. Even so, I expect oil output to be higher than 2008 on average due to the above average hurricane disruptions last Fall.
US Oil Output 1% Below Last Year
The US EIA weekly petroleum report announced that US oil output fell 1.3% last week to a rate of 5.107 million barrels per day (Mbd). That is 1% below the same week in 2008 and 6.8% lower than the 2009 production peak of 5.48 Mbd hit in mid-April.
How Low Could Oil Output Fall?
US oil output will probably continue to gradually fall since drilling for new wells remains below average on the relatively lower oil prices of 2009. But production will be higher than last year in the period from late August to October — unless we have an unlikely repeat of hurricanes slamming directly into the Gulf of Mexico’s oil production and refining hub. But an interesting question is, “How low could US oil output go?” If the average output decline of .5% per week over the last 15 weeks continued for several weeks, production would be significantly below 5 Mbd by the winter. Such an occurrence could lift prices back to $80 per barrel, especially if current trends continue to our South.
Mexico Oil Output Plummets Further
Mexico’s state-run oil company, PeMex, recently reported its output fell even more in June. Its liquid production was 3.6% below May levels, and 10% below June 2008 (crude was 11% lower). Production is now at the lowest point since the early 1990s and shows little sign of curbing its fall. Output from Mexico’s largest discovered field, Cantarell, continued to nosedive — falling 41% from last June to a production of .604 Mbd. This country that was recently the second largest source of US imports may struggle to export a single barrel by 2015.
With lower output in the US and Mexico (along with depletion in Norway, the UK and Russia), the only way we can keep a lid on our transportation costs in the years ahead is to increase fuel efficiency and implement an active transportation revolution. A bicycle network for local and long-distance travel will be an important step for US planners to take (see the East Coast Greenway vision for a model). And as Fatih Birol of the International Energy Agency says, let’s leave oil before oil leaves us.
Onwards in the Sustainable Energy Transition-
Tags: fossil fuels, gas prices, Oil, peak oil, renewable energy, US