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Energy Tomorrow Blog

Is the World About to See an Oil Shortage?

oil supply and demand  production  global energy 

Dean Foreman

Dean Foreman
Posted February 24, 2021

It’s possible we could be headed for a shortfall in global oil supply as soon as next year – pretty remarkable considering where oil demand was last spring, with economies slowing under the weight of the pandemic.

Based on projected rising demand, the natural production decline from existing wells and decreases in drilling activity and industry investment – especially in the U.S. – the world’s oil needs could outpace production in 2022. An undersupply potentially could put upward pressure on costs, impacting consumers, manufacturers and, generally, any process that utilizes oil.

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MSR: Oil Demand Nears January 2020 Levels

monthly-stats-report  oil demand 

Dean Foreman

Dean Foreman
Posted February 18, 2021

As oil prices rallied this past week, headlines suggested that oil demand recovery is expected to pick up speed (subscription required) later this year. However, API’s latest Monthly Statistical Report, based on January data, suggests that U.S. oil markets already kicked off 2021 with a remarkable month:

Total U.S. petroleum demand returned to within 1.2% of its level from January 2020 despite the pandemic; refining and petrochemical demand for other oils – naphtha, gasoil, propane/propylene reached a record-high level (6.5 million barrels per day, mb/d) and 33.1% share of total U.S. petroleum demand; and the lowest U.S. crude oil imports for January since 1992 propelled U.S. petroleum net exports.

Consider this: For all of the economic pain and dislocation caused by the 2020 COVID-19 recession, U.S. petroleum demand returned to within a hair of its pre-COVID levels and well within the five-year range. 

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Energy Policies and Potential Impacts on Household Budgets

consumers  consumer products  affordable energy  policy  white house 

Dean Foreman

Dean Foreman
Posted February 16, 2021

Most people get riled up when energy costs rise, especially prices at the pump. It’s understandable; energy represented 6.5% of household expenditures in 2019, per the U.S. Bureau of Labor Statistics’ Consumer Expenditure Survey. Yet, as we’ll see, energy policy choices can affect far more than just what you pay for a gallon of gasoline or your monthly electricity bill.

For example, imagine how you would feel if you learned that U.S. energy policies materially raised the cost of houses and vehicles, in addition to the fuel they require, the costs of which have been on the rise. Those two together plus energy represent more than half of a typical household’s expenditures.

Higher energy costs are a distinct possibility with the Biden administration’s decision to halt new federal natural gas and oil leasing, potentially reducing domestic production, as well as possible moves on the regulatory front and other actions that could limit drilling or hydraulic fracturing. These could put upward pressure on energy costs that then would ripple across various sectors since virtually everything has an energy component.

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Lessons from Oklahoma's Government Intervention in Natural Gas Markets

oklahoma  natural gas production  revenues 

Dean Foreman

Dean Foreman
Posted February 3, 2021

This past year saw Oklahoma officials pursue a unique experiment – reducing how much natural gas production would be permitted from a well, called “natural gas production prorationing.” 

This may be about to change. The intervention has been costly for the state and suggests that governments should exercise more caution when considering actions that could affect markets.

Regulations to prevent wasting resources have been on the books for decades, and Texas has something similar. However, through its Corporation Commission, Oklahoma was the only state that imposed more stringent natural gas production limits last year. The state also increased its efforts to enforce those rules in response to market conditions associated with the COVID-19 recession – that is, strong supply, weak demand and low prices for natural gas.

It’s looking like a mistake.

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Production of Pandemic Essentials Helps Nation, Industry as 2021 Opens

monthly-stats-report  economic recovery  demand  petroleum products 

Dean Foreman

Dean Foreman
Posted January 14, 2021

API’s latest Monthly Statistical Report (MSR) underscores the importance to industry of producing essential materials during the pandemic – including sterile packaging, medical plastics and antimicrobial coatings, including polymers.

Naphtha and gasoil in refining and petrochemicals increased 10.3% year over year (y/y) in December to a record-high of 5.9 million barrels per day (mb/d), or 31.3% of total U.S. petroleum demand. Again, industry benefited from this demand and in the process helped the nation respond to the pandemic. The technical term for that is “win-win.”

December also produced an important milestone – confirmation that the U.S. was a petroleum net exporter on an annual basis for the first time in more than 60 years. It’s remarkable given the headwinds of COVID-19 and increased pressure for nations to become self-reliant. The abundance, affordability and empowering nature of U.S. petroleum has helped cut through pessimism about global trade.

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Normalcy Returning to Natural Gas and Oil Markets

monthly-stats-report  demand  economic recovery 

Dean Foreman

Dean Foreman
Posted December 17, 2020

Celebrating normalcy long has marked Americans’ emergence from a variety of national crises. It’s the same with COVID-19. As we emerge from the pandemic, we dearly want to celebrate a return to normal. Thankfully, as the economy recovers, natural gas and oil are doing their part.  

API’s new Monthly Statistical Report (MSR) and quarterly Industry Outlook show our oil industry’s fortitude and resiliency through an unprecedented period.

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Despite Challenges of 2020, U.S. Boosts its Energy Security

us energy security  imports  trade 

Dean Foreman

Dean Foreman
Posted December 11, 2020

Despite the 2020 COVID-19 recession, the U.S. has reached milestones for energy security and trade, including its lowest imports of crude oil and reliance on OPEC in nearly three decades. 

Achieving the milestones this year has enabled the U.S. to be on track to become a net exporter of petroleum and total energy on an annual basis for the first time in more than 60 years. At the same time, U.S. refiners have increasingly leveraged domestically-produced energy, ultimately benefiting households through lower spending on energy.

In short, record productivity has enabled abundant domestic oil and natural gas supplies, amped-up U.S. energy exports and displaced foreign energy imports to the benefit of American consumers. This is the backdrop for the imminent change of U.S. administration, as well as a heightened focus on U.S. energy security –  see here and here  even though petroleum products and natural gas have remained abundant and at historically low prices. 

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Oil Market Fundamentals Suggest 2021 May Recoup Much of 2020 Losses

oil markets  economic recovery  investments 

Dean Foreman

Dean Foreman
Posted December 8, 2020

Although many uncertainties remain, oil market fundamentals have recently improved along with economic recovery from the 2020 COVID-19 recession, as we discussed here. If estimates from the U.S. Energy Information Administration (EIA) and others prove to be correct, 2021 could recoup much of the growth, spending, investment and energy demand that was forgone this year. 

While 2020 has been an especially challenging year and business climate, what we’re seeing is that the U.S. natural gas and oil industry has resiliently increased its productivity to record levels, lowered its costs and expanded critical infrastructure to reposition for growth in a potential recovery.

A critical question for the United States — its economic growth, energy security and trade balance – concerns who will supply the market if it recovers as expected.

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Consumer Spending and Investment Could Kickstart New Economic Growth

economic growth  oil and natural gas development  global demand  consumers 

Dean Foreman

Dean Foreman
Posted December 1, 2020

The year has brought extreme and at times contradictory information about the economy and our industry, making it increasingly difficult to determine whether the economic recovery has gained firm footing and ultimately traction, in which natural gas and oil will play a key role.

Importantly, we currently see well-grounded pillars for expected U.S. and global economic growth over the next two years – personal consumption expenditures and investment that generally represent the majority of GDP. These could kickstart new economic growth and prosperity that will not only require but fundamentally be enabled by oil and natural gas.

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Data Indicate Continuing U.S. Demand Recovery

monthly-stats-report  oil demand  economic recovery 

Dean Foreman

Dean Foreman
Posted November 19, 2020

While the International Energy Agency and OPEC recently lowered their expectations for global oil demand for this year and the next, the United States has continued to make measured progress, according to API’s latest primary data.

In October, U.S. petroleum markets reflected a U.S. economic recovery in progress. Demand increased broadly among fuels – diesel, jet fuel, other oils and gasoline among urban areas.

While these offer solid indications of domestic activity, international trade – particularly the pull for U.S. refined products – picked up in October. Moreover, the U.S. Energy Information Administration (EIA) projects record high U.S. exports of liquefied natural gas (LNG) in November.  

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