http://online.wsj.com/home-page
Mr. Morse is head of global commodities research at Citi and a former State Department official.
In energy, North America is becoming the new Middle East. The only thing that can stop it is domestic politics.
The United States has become the fastest-growing oil and gas producer in the world, and it is likely to remain so for the rest of this decade and into the 2020s. Add to this output the steadily growing Canadian production and a likely reversal of Mexico’s recent production decline, and theoretically total oil production from the three countries could rise by 11.2 million barrels per day by 2020, or to 26.6 million barrels per day from around 15.4 million per day at the end of 2011.
Whether the increase results in the U.S. reducing its imports or whether our net exports grow doesn’t matter much to world balances. Either way, North America is becoming the new Middle East. The only thing that can stop this is politics—environmentalists getting the upper hand over supply in the U.S., for instance; or First Nations impeding pipeline expansion in Canada; or Mexican production continuing to trip over the Mexican Constitution, impeding foreign investment or technology transfers—in North America itself.
On top of this, the U.S. and Canada could see natural gas output rise by 22 billion cubic feet per day by 2020, with 14 billion of it coming from the Lower 48 states, four billion from Alaska and four billion from Canada. That’s an increase of one-third, catapulting this continent into the ranks of significant exporters of liquefied natural gas.
These numbers provide a useful benchmark for measuring ways that policies could obstruct the pace of supply growth. We already have the experience of the BP/Macondo disaster in the Gulf of Mexico in April 2010, which led to a moratorium on drilling in U.S. federal waters, and a revamping of the U.S. regulatory regime governing leasing, revenue collection and safety. As a consequence, U.S. deepwater production has fallen by more than 300,000 barrels per day since then.
North America already has become the most important marginal source of oil and gas globally. U.S. imports of crude oil and petroleum-product imports have been plunging. The U.S. reached its peak as a net petroleum importing country in 2005-06. Since then, crude oil imports have fallen by almost two million barrels per day. Because the U.S. has the largest refining sector in the world, as domestic demand has fallen it has become a net petroleum-product exporting country—exporting more than 1.2 million barrels per day by the end of 2011—the first time it reached this status since 1949. The U.S.’s growing crude output is affecting the price difference between the traditionally more expensive light sweet crudes (which yield higher-value products like gasoline) and heavy sour grades.
For the rest of this article, please go to the Wall Street Journal website: http://online.wsj.com/article/SB10001424052702304459804577285972222946812.html?mod=googlenews_wsj