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IEA: In 5 Years, US Will Lead Production Gains
Design Team • March 8, 2016
According to the International Energy Agency, the United States will lead the world in production gains by 2021. It's believed that both the United States and Iran will have tremendous production gains in both non-OPEC and OPEC countries , with Iran quickly increasing its oil production following the expiration of sanctions against the country's oil exports. Oil prices have been erratic throughout the globe, but this has done little to dissuade the advances made in the American oil industry, and has even improved upon efficiency throughout the oil and gas market.
SUPPLY AND DEMAND AMONG OPEC AND NON-OPEC PRODUCERS
Oil has reached record breaking lows in recent months, falling from over $100 a barrel in 2014 to under $30 a barrel in early 2016. This tremendous decrease in prices has destabilized the market, and has been mostly caused by a flood of cheap crude oil from OPEC countries. OPEC has been entering into negotiations to stop this increase in cheap oil, but Saudi Arabia has declined to slow its production, thereby fueling the lower prices in hopes of pushing North American oil production out of the market. Nevertheless, the United States has responded by creating cheaper, faster, and easier methods of producing oil. Hydraulic fracturing is one such method, that has been utilized to both increase production and lower production costs.
OPTIMISM WITHIN THE UNITED STATES OIL AND GAS MARKET
The United States has continued to produce large amounts of oil despite low per barrel costs. Though there may be an increase in general oil supply, there are also increases in demand; notably, China has been purchasing large amounts of cheap crude oil, and has been slowly switching away from coal. Oil and natural gas has many benefits over coal, which causes significant pollution. As the world moves away from coal, demand for both oil and natural gas may even out. Nevertheless, the oil market is and has been erratic, and oil producing companies within the United States market have been taking steps to prepare for further volatility.
POTENTIAL ISSUES LOOM AHEAD REGARDING IRAN AND ITS SANCTIONS
In addition to China's impact on the oil and gas market, it remains to be seen how Iran will affect the market. Iran is one of the biggest oil producing nations, but it has been crippled for some time due to the now expired oil sanctions, which have only been recently lifted. Following the initial lift of the Iran sanctions, oil prices fell to $28 per barrel. Whether or not the increased production from Iran will even out the decreased production from OPEC remains to be seen, though a significant amount of the price shortage was caused more by investor concerns than already increased supply.
The United States is certainly ramping up production, and companies within the United States are continually finding innovative and creative ways to recover profits regardless of oil prices. However, it does remain to be seen whether the price will continue dropping, which could lead to some significant challenges for those within the domestic oil and gas industry. Domestic companies will need to move forward with revolutionary new methods of oil production, such as hydraulic fracturing methods, in order to outpace foreign oil and keep the domestic economy strong. For more information about the oil and gas industry, contact Heavy Iron Oilfield Services today.
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