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Doubling US Oil Output Ensures Crude Stays Low



Oil Plunge Continues, Senate Approves Additional $320 Million For Small Businesses

Less than a decade ago, crude oil reached its all time high of just over $147 a barrel. Today, that same barrel costs under $50 per barrel. With oil so cheap, instead of slowing down, U.S. oil companies are increasing drilling and doubling U.S. oil inputs? U.S. oil is such a small percentage of the global oil supply, yet our country is disrupting the global oil industry. How, exactly?

And What Can we Expect Next for US Oil?

The United States produces approximately one percent of the world’s oil. But that one percent is ensuring oil stays within range of $50 a barrel. Currently, the U.S. is exporting 1 million barrels of oil a day. That’s double the pace of 2016.

In November, the Organization of the Petroleum Exporting Countries (OPEC) agreed to temporarily reduce oil output by 1.8 million barrels per day in an attempt to manipulate oil prices higher. The U.S., not a part of OPEC, took advantage of the opportunity — as well as low price of oil tanker rentals — has boosted U.S. oil production.

However, the most important factor in U.S. oil’s surge has been the government backing off regulations. In 2015, Congress lifted a ban on oil exports, which led to a surge in fracking. As such, American oil companies will continue to drill, frack, and ship oil to other countries.

And while that can help boost oil jobs, it’s definitely keeping oil prices down. If the U.S. keeps producing oil at this near-record pace, oil could drop even further as OPEC nations start to realize that their production decrease has had no effect whatsoever on increasing oil prices. The end result of that would be OPEC nations rampiing up production to regain market share. Combined with high U.S. output, the global supply of oil would turn into a glut. And while that might be great for consumers who have to fill up the tanks in their cars, it’s bad for long term oil jobs and profits, which means it’s bad for the health of the U.S. economy.

Watch this video from NTDTV regarding OPEC’s reaction to U.S.’ expanded oil production:

Crude dropped 4% after surprise inventories scared investors, and that won’t change anytime soon as oil should continue to drop.

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  1. Pingback: Guy Cohen's Take on How the Markets Will React to UK Elections, Comey Hearings

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