Data just released by the Energy Information Agency reveals that U.S. crude oil production peaked to 8.248 million barrels per day last week, a 28-year high, thanks to the success of horizontal drilling and hydraulic fracking in North Dakota and Texas. Yet prices at the pump remain stubbornly high. What gives?
A number of factors come into play, including persistent high demand, limited refining capacity, geopolitical instability, and speculation on the international market, according to Bloomberg News.
While the reporting arm of the U.S. Energy Department forecasts a continued rise in domestic output, up to 9.24 million barrels per day in 2015, the world’s premier oil cartel, OPEC, has been unable to meet its goals due to turmoil in Libya, northern Iraq, and southern Sudan. Combined with American refining limitations, rising tension between Russia and Ukraine, deteriorating security in Nigeria, and China’s aggressive posture in South Asia, a witches’ brew of uncertainty virtually guarantees that futures buyers will keep Brent crude prices high, above $100 per barrel.
In the United States, gasoline prices rose twelve straight weeks between January and April, 20 cents per gallon higher than last year, despite output rising 78,000 barrels per day, Bloomberg reported. International interdependency plays a huge roll here.
To wit, OPEC needs to increase its third quarter production by 900,000 b/d if demand is to be met, and “…it remains to be seen whether it will manage to overcome the above-ground hurdles that have plagued some of its member countries lately,” warned the International Energy Agency last week, according to the Daily Caller.
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To ease some of America’s internal constraints, Sen. Lisa Murkowski, R-Alaska, ranking minority member of the Energy and Natural Resources Committee, has called on Energy Secretary Ernest Moniz to overturn rules which bar overseas shipments of U.S. oil.
Inventories here rose to 399.4 million barrels in late April Bloomberg reported, and this “increases the pressure on the U.S. to finally allow for the export of crude,” according to John Kilduff, hedge fund partner at energy specialists Again Capital LLC in New York.
While turmoil in numerous OPEC-member nations continues unabated, President Obama likely will not make a decision regarding the Keystone XL Pipeline until after the November elections. But a worsening crisis in Ukraine or an Israel-Iran outbreak of hostilities could force his hand, and ramp up the discussion seriously over U.S. energy independence.
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