2015 oil prices: US to emerge as dominant player

For years, Organisation of Petroleum Exporting Countries (OPEC) pulled the strings set the price of oil and controlled the supply. After dictating the course of oil prices for more than 50 years, OPEC is finding its influence diminished.
Right now, OPEC represents about 40 percent of global daily production. The organization still has a say in what the energy market looks like. But for OPEC, oil can no longer be used as either a weapon or as a lever. There is simply too much production arising beyond the control of OPEC.
For 2015, US will emerge as dominant player. OPEC member countries are gradually losing the largest energy market in the world and the irony is that they will soon be competing for the markets that used to be theirs for the taking. Projections from recent happenings reveal that in 2015 the US will start dictating to the market. With the advent in 2015 of large US exports of liquefied natural gas (LNG), the effect is even larger, and with it comes the hastening of OPEC’s decline.
One of the major concerns facing OPEC is that not only is North America off the map as a target for exports, progressively other parts of the world will be tapping new reserves and meeting more of their domestic demand locally.
Russia, Mexico, and Canada have always been outside the OPEC orbit. And while Moscow has on occasion paralleled OPEC moves, one of the three most dominant oil producers has broken over the Saudi-inspired move to keep prices low. Russia is now fighting to save the ruble as its central budget disintegrates. The current price of oil is driving the Russian economy headlong into recession.
The OPEC cartel may play the game a bit longer of selectively cutting prices to one region or another as it is doing right now but this will only buy a few years. The end of hegemony is coming.
US have emerged as a major global energy player in a literally famed “two-horse race” with Saudi Arabia for the lead in oil production.
US production will maintain upward swing
US have arrived. The game changer, of course, is the shale revolution. Actually, this includes both tight and shale oil and gas. Both are hydrocarbons trapped inside rock formations, requiring fracking and horizontal drilling. “Tight” is a broader category including shale and other rock, especially sandstone lenses. It has fundamentally altered the landscape, and turned the U.S. into a net surplus producer.
Few years ago, the American economy was dependent upon imports to meet almost 70 percent of its daily oil requirements. In the next five years, American oil import will drop to below 30 percent.
US seized the initiative
Recent data indicates the vast bulk of available shale oil reserves are located outside North America – more than 86 percent of the oil and 88 percent of the gas. Those reserves can be extracted using current technology but the US has seized the initiative on unconventional oil production.
It will take other global plays longer to rev up unconventional production especially in terms of additional of often very costly needed infrastructure, and the development of major new delivery networks.
At present, the rise in American unconventional production affects OPEC only in the expected decline of exports it can expect to move to the US because exports of crude oil from the states is prohibited by statute.
However, it is only a matter of time before American producers will be allowed to export excess production. And there is ample room for that without adversely impacting either domestic availability or price.
Not only is OPEC losing the largest market in the world – the US – but the organisation will soon have to competewith the US and Canada for the lucrative European and Asian markets.
At $50, shale oil production is still profitable
The current low price of oil will not slow US shale production in 2015 oil prices. Technical advances have both improved the production and lowered the overall cost of oil drilling. Better drilling techniques and geological mapping have provided additional basins and deeper horizons. Environmental problems have been addressed in some dramatic improvements, lowering or eliminating the need to put dangerous chemicals downhole.
However, there are still places were fracking should not occur – watersheds, seismically sensitive and active areas, and locations abutting population concentrations. Nonetheless, the projected volume of extractable reserves continues to increase, subject to one primary caveat; the price of production.