Increasing Production of Crude Oil in the US Should Contribute to Reduced Oil/Gas Prices Globally – but it Doesn’t

The link in this post, to an article that originally appeared in Energy Trends Insider, provides insight into a very interesting appreciation of the mechanics of global crude oil production and consumption. Whenever previously unknown reserves of crude oil and natural gas are discovered in any country around the world – especially, those countries that are not marred by the scars of geopolitical instability, AND, even better, when those new and larger reserves of crude oil and natural gas are discovered in the US, the global financial markets reaction is positive. In the US, the government begins to promote how the exploitation of these newly found reserves will preserve energy independence well into the future while consumers begin to anticipate the arrival of lower gasoline and home heating fuel prices. Everyone seems to be sharing in the euphoria of this unexpected bonanza.

Of course, we all are becoming smarter about potential environmental damages and clean-up costs that are likely when things don’t quite go as anticipated. We should learn from our past experiences – but often do not – that if there is the potential for something to go wrong, it will. And, then, of course, everyone again can claim to learn from the mistake, mea culpas are amply expressed and we return to business as usual.

So, why then, would these be the natural consequences of those newly discovered reserves in the US?

“At the same time, U.S. and European demand for petroleum products are declining. The economic troubles in the Euro zone have dampened economic activity (and petroleum demand), while in America, economic growth has returned, but the consumption of petroleum products are down as consumers change habits and lifestyles to drive less.”

Andrew Holland offers some very convincing explanations to this contradiction.

“The problem is that our vision is limited only to what we see. The media is focusing on what is close to home – and by doing that we’re missing the entirety of the global market for oil. Even though production of oil from new fields in the U.S. is booming, there is a consistent decline in production from old fields around the world, and OPEC members have not increased production. Meanwhile, though demand for oil is falling in the U.S., it continues to grow around the world.”

He offers more that focuses on rising global demand and where the real profit for refined products is to be found.

Oil Boom and High Energy Prices

It remains in our best interest to understand the impact of the world on our world.

 

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