US emerges top global oil producer

United States has overtaken Saudi Arabia and Russia to become the world’s biggest producer of oil as extraction of energy from shale rock strengthens the nation’s economy, according to Bank of America. The country became the world’s largest natural gas producer in 2010.

Francisco Blanch, the bank’s head of commodities research said in the report that “America is now the world’s leading producer of oil and gas. The American shale revolution has had a transformational effect on the US and global economies in recent years. Low energy prices are a key edge of the US economy.”

US production of crude oil, along with liquids separated from natural gas, surpassed all other countries in the first six months of this year.

Getting to the top

Oil extraction is soaring at shale formations in Texas and North Dakota with huge investment committed in recent years. Annual investment in oil and gas in the US is at a record $200 billion, reaching 20 percent of the country’s total private fixed-structure spending.

“There’s a very strong linkage between oil production growth, economic growth and wage growth across a range of U.S. states,” Blanch said.

Since 2008, US petroleum production has increased 7 quadrillion Btu, with dramatic growth in Texas and North Dakota while Russia and Saudi Arabia each increased their combined hydrocarbon output by about 1 quadrillion Btu over the past five years.

Altering crude market dynamics

With the insurgency in Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia; exports from Libya have been disrupted by protests, while Nigeria’s production is crimped by oil theft and sabotage in addition to Russia-Ukraine fiasco, crude prices should have been hovering around $140 per barrel but for the rising US oil production.

The rapid growth of oil and natural-gas production from unconventional shale resources in US is rapidly altering the crude market dynamics with positive geopolitical implications making US become more critical touchstone to market stability.

Looking into the future

It’s very likely the US stays as number one producer for the rest of the year as output is set to increase in the second half of 2014. By 2019, US oil output will surge to 13.1 million barrels a day and plateau thereafter. The country will lose its top-producer ranking at the start of the 2030s.