On Monday the International Energy Agency indicated that total US crude output will increase by 1.3 million barrels a day from 2015 to 2021 despite a continued slump in oil prices. US shale output is currently decreasing and is expected to decrease in 2017, but is then expected to increase production once again from 2018 onward. In its medium term report, the IAE stated ‘anybody who believes that we have seen the last of rising US shale oil production should think again.’
The announcement has OPEC leaders thinking about the future. A recent Bloomberg article stated,
“After first ignoring it, later worrying about it and ultimately launching a price war against it, OPEC has now concluded it doesn’t know how to coexist with the U.S. shale oil industry.
‘Shale oil in the United States, I don’t know how we are going to live together,’ Abdalla Salem El-Badri, OPEC secretary-general, told a packed room of industry executives from Texas and North Dakota at the annual IHS CERAWeek meeting in Houston.
The Organization of Petroleum Exporting Countries, which controls about 40 percent of global oil production, has never had to deal with an oil supply source that can respond as rapidly to price changes as U.S. shale, El-Badri said. That complicates the cartel’s ability to prop up prices by reducing output.
‘Any increase in price, shale will come immediately and cover any reduction,’ he said.”
Such is the importance of planning for the future. The US shale boom that launched the price war between OPEC and the United States while subsequently driving costs for consumers toward rock bottom came on as suddenly as the most recent price plummet. This is the life of the oil markets; up and down, always cycling. But America has a choice to make for future growth.
We can allow it to catch us by surprise again and rely on aging rail and road infrastructure to transport oil from the Bakken Shale Formation, or we can invest in our future. By building pipeline infrastructure like the proposed Dakota Access Pipeline, America will stand ready for production levels to increase. While OPEC wrings their hands, the United States will lead in production while safely and reliably transporting crude oil to refineries for American consumption.
Oil prices will not remain low forever and eventually production cuts will increase the price per barrel to breakeven. When that time comes, regardless of OPEC actions, American pumps will stand ready to supply the world with energy and will rely on American pipelines to do so.