If California would consider changing their policies towards exploration, production and drilling (E&P) of oil and natural gas there could be a resurgence in middle class jobs and lower energy costs to help offset recent rate increases by the Public Utilities Commission.
HSBC predicted in a recent report that Texas is set to outpace Iran and Iraq in oil production. Furthermore, HSBC stated the Permian Basin in West Texas and the Eagle Ford are likely to produce 5.6 million barrels per day (bpd) by 2019. Iraq is expected to produce 4.8 million bpd and Iran 3 million bpd. If HSBC’s analysis comes true then Texas would become the world’s number three-oil producer.
This news means the US should surpass Russia and Saudi Arabia in 2019 as the number one oil producer in the world based on Texas’ output. California’s Monterrey Shale is an untapped energy resource of oil and natural gas that could add to this total along with additional California reserves. The Energy Information Administration (EIA) expects US production to reach 12 million bpd by late 2019. A stunning accomplishment when you consider during the Saudi-led war on US shale that crashed oil prices in 2014, bankruptcies overtook the Permian Basin and production in the US fell from 9.6 million bpd to 8.5 million bpd.
There are three reasons why US oil production is skyrocketing. Number one is demand is rising. OPEC has recently forecast that global oil demand should, “surpass 100 million barrels per day next year.” The group sees demand increasing by “1.45 million bpd next year,” however trade tensions between the US, China, Canada, the EU and other longstanding trade agreements in question could temper growth. OPEC qualified their report about demand rising over trade worries by saying, “If trade tensions rise further and given other uncertainties, it could weigh on business and consumer sentiment.” With the US and the EU working towards resolving a looming trade dispute over increased tariffs in late July this is a positive first step towards global oil demand staying strong.
Second, US federal tax policies are favorable towards exploration and production (E&P), which will assist with production increases. President Trump’s America First Energy Plan states:
“That we (the US) have vast untapped domestic energy reserves. We must take advantage of the estimated $50 trillion in untapped shale, oil and natural gas reserves, especially those on federal lands.”
According to Karen Alderman Harbert, President of the U.S. Chamber of Commerce’s Global Energy Institute believes record-breaking oil production will also lead to, “an explosion in exports.” Growth in exports will allow additional supply to be sold that otherwise wouldn’t come to market. Expanding energy development – particularly, expanding fossil fuel exports – will be a top priority for the Trump administration as they will also use energy as a geopolitical tool. Texas is the example for the US moving forward of government and private business working towards expanding oil and natural gas production. US government policies will continue moving in this direction. California has the potential to outpace Texas in E&P if great paying jobs that energy accords were placed at the forefront and resistance to Federal energy policies were eliminated.
The third and biggest reason is use of technology where the US is making their greatest gains towards increased production. Since the 2014 crash shale companies have slashed costs, but also employed automation and cutting edge technologies like robotics, sensors and smart phone to keep drilling. The oil and gas industry is undergoing a modernization push. Silicon Valley is leading the way and policymakers should do everything possible to marry energy and technology moving forward.