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US oil production grew more in 2012 than in any year in the history of the domestic oil industry back to the Civil War

Mark J. Perry | January 20, 2013, 12:48 am

From Saturday’s WSJ:

U.S. oil production grew more in 2012 than in any year in the history of the domestic industry, which began in 1859, and is set to surge even more in 2013. Daily crude output averaged 6.4 million barrels a day last year, up a record 779,000 barrels a day from 2011 and hitting a 15-year high, according to the American Petroleum Institute (API), a trade group. It is the biggest annual jump in production since Edwin Drake drilled the first commercial oil well in Titusville, Pa., two years before the Civil War began (see chart above).

The U.S. Energy Information Administration predicts 2013 will be an even bigger year, with average daily production expected to jump by 900,000 barrels a day. The surge comes thanks to a relatively recent combination of technologies—horizontal drilling and hydraulic fracturing, or fracking, which involves pumping water, chemicals and sand at high pressures to break apart underground rock formations.

Together, they have unlocked deposits of oil and gas trapped in formations previously thought to be unreachable.

That has meant a resurgence of activity in well-established oil regions, such as West Texas’s Permian basin, as well as huge expansions in areas that had been lightly tapped in the past, such as North Dakota’s Bakken shale region. The Bakken has gone from producing just 125,000 barrels of oil a day five years ago to nearly 750,000 barrels a day today.

The benefits of the surge in domestic energy production include improving employment in some regions and a rebound in U.S.-based manufacturing.

MP: Actually, the API’s estimate of a 779,000 barrel per day (bpd) increase in domestic oil last year is pretty conservative compared to year-end comparisons of EIA data for weekly US oil production. Compared to oil output at the end of 2011 (5.846 million bpd), US oil production increased by 1.139 million bpd last year to almost 7 million bpd during the last week of December 2012. Alternatively, using the EIA’s four-week production averages show an increase of 1.063 million bpd from December of 2011 to December 2012. The reason that the yearend comparison shows a much higher annual increase in US oil production (about 1 million bpd vs. 779,000 bpd) is that domestic oil production accelerated during the second of last year – crude oil output increased 14.6% during the second half of 2012 compared to the 4.2% increase during the first six months.

The record increase in oil output last year reminds us the US oil and gas industry continues to be at the forefront of the otherwise sub-par economic recovery, and without that sector’s strong growth in output and jobs, the economy’s sub-par performance would be even more lackluster. The 1 million bpd increase in domestic oil production last year has delivered a powerful energy-based economic stimulus to the economy, creating thousands of new direct, shovel-ready jobs in oil and gas activities, and igniting many spinoff business and indirect jobs throughout the oil and gas supply chain like the “oil-by-rail shipping boom.” The future of the US economy over the next few years looks a lot brighter because of America’s surging domestic energy production.

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API: Hispanic Employment Rate, Jobs Creation Hurt by Keystone Delay

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President Barack Obama’s decision to delay approval of the Keystone Pipeline project is hurting job creation opportunities in the United States, particularly among Hispanics, said officials with the American Petroleum Institute (API) on Tuesday.

The Keystone Pipeline will not only help lower oil prices for U.S. consumers, but have a ripple effect spreading outward from Nebraska and neighboring states to create jobs and help small businesses.

This job creation will be helpful in particular for the U.S. Hispanic population, the unemployment rate for which is one to two points higher than other demographic groups in the United States.

The Los Angeles Times reported in 2010 that the unemployment rate among U.S. Hispanics rose because of their disproportionate unemployment in industries and regions significantly impacted by the economic downturn.

According to a U.S. Department of Labor report, the unemployment rate among Latinos in the United States averaged 11.5 percent in 2011; the most recent unemployment report in February 2012 shows improvement for all Americans, including Latinos, who have seen their unemployment rate decline to 10.7 percent in February from a high of 13.1 percent in November 2010.

In 2011, 5.8 percent of Latinos were self-employed compared to 7.2 percent among whites, partly due to lower educational attainment and less access to financial wealth.

The entry rate of Latinos into self-employment compares favorably to that of non-Latino Whites and their entry rate is even higher compared with whites in low-barrier sectors, according to the Department of Labor report. However, Latinos tend to have lower success rates with their new businesses and exit self-employment at a higher rate than whites.

People of Hispanic or Latino ethnicity represented 15 percent of the U.S. labor force in 2011, or nearly 23 million workers. By 2020, Latinos are expected to comprise 19 percent of the U.S. labor force, according to the U.S. Department of Labor.

API ‘Disappointed’ in Keystone Delay, Impact on Jobs

“We’re disappointed that the current administration doesn’t see how this project doesn’t add up,” said Hispanic Leadership Fund President Mario Lopez during a conference call with reporters, noting that the project appears to be delayed for political reasons.

“Four years ago, Obama promised to push unemployment lower and lead us out of the depression,” Lopez said. “Approval of the Keystone pipeline would demonstrate to all Americans and to Latinos across the country that he cares about jobs and domestic energy.”

API has committed significant resources to support all aspects of the Keystone project.

“The earth hasn’t moved and the geology hasn’t changed,” said API Executive Vice President Marty Durbin, adding that the Keystone pipeline project is “as ready as it can get.”

Durbin said that imports of Canadian oil sands supply to the U.S. Gulf Coast would not create a supply glut, but would displace oil imported from other countries.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

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GOP says Obama, Dems are undermining domestic energy production

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The Obama administration is undermining domestic fossil-fuel production, say Republican Party officials.

They point to comments by EPA Regional Administrator Al Armendariz, who resigned Sunday as agency administrator for the south-central region, suggesting that the agency’s “general philosophy” is to “crucify” oil and gas companies as being symbolic of the administration’s attitude.

The Washington Free Beacon reported in a March 13, 2012 article that Obama Interior Department officials have intentionally “slow walked” drilling permits, reducing the number of annual permits by two-thirds from 157 before the 2010 drilling moratorium to 51 after. The GOP argues that small- to medium-sized businesses are the ones getting hurt, not “Big Oil” as Democrats like to argue.

As a result, half of all Gulf of Mexico businesses have laid-off workers and a further 39 percent have cut salaries and/or hours. A further 46 percent of affected businesses have moved their operations out of the gulf.

EPA regulations could result in a 11 percent drop in gas production and a 37 percent drop in domestic oil production.

The controversial practice of fracking, necessary to extract gas from a large portion of the nation’s gas wells, could be slashed by up to 52 percent, according to the American Petroleum Institute.

The same attitude carries over to coal, where the Washington Post reported that looming EPA regulations would end the construction of conventional coal-fired power plants nationwide. Thirteen percent of all coal-fired power plants are likely going to shut down because of EPA regulations.

This has hit too close to home for a traditional Democratic constituency – coal miners.

United Mine Workers President Cecil Roberts went to the extent of comparing EPA Administrator Lisa Jackson’s actions against coal with the Navy SEALs’ takedown of Osama bin Laden.

By John Rossomando /// April 30, 2012

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The oil industry’s plan to lower gas prices

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By Steve Hargreaves @CNNMoney March 23, 2012: 5:20 AM ET

NEW YORK (CNNMoney) — The oil industry recently laid out a set of proposals it believes will instantly lower gasoline prices.

The proposals call for more domestic oil production, fewer environmental regulations on refineries and fuel, and for not raising taxes on the industry. They’re basically what the Republican presidential candidates are calling for.

But analysts say those ideas will do little to lower gas prices in the short term. Here’s why:

More drilling: The industry has long held that this is key to lowering prices, and “unlocking America’s energy potential” is a theme all the Republican candidates are touting.

The industry has studies saying that if it was allowed to drill off both the East and West coasts, on all federal land that isn’t a national park and in Alaska’s national wildlife refuge it could produce another 10 million barrels of oil a day by 2030 — double the nation’s current oil output.

Eighteen years is a long time to wait for gas prices to come down. But the industry says that if Obama merely announced such a plan oil prices would drop overnight in anticipation of this new production.

“Markets are driven by expectations,” Jack Gerard, president of the American Petroleum Institute, said on a recent conference call.

Saudi Arabia can’t save us from high oil prices

Gerard noted that oil prices fell $16 in the two days after George W. Bush lifted a moratorium on drilling off the coasts in 2008, a moratorium that was effectively reinstated after BP’s (BP) Gulf of Mexico disaster.

But oil traders are skeptical.

“Just because a policy is announced doesn’t mean it can be easily or quickly attained, and the markets will discount that,” said Addison Armstrong, director of market research at the brokerage Tradition Energy.

Those against more drilling note that U.S. oil production has increased by about 15% since Obama took office, and prices have only gone up.

Obama himself likes to take credit for this production increase, although actual federal acreage available for drilling is down slightly from the Bush administration.

The extra production comes mostly from private land and is spurred by higher prices, new technology and the expanded use of hydraulic fracturing.

Known as fracking for short, the process is highly controversial as many fear it is contaminating the ground water. Yet Obama has allowed it to continue mostly unfettered — and has taken flack from his left flank as a result.

In the medium term it’s hard to say what impact increased production from the United Sates would have on oil prices.

Ten million barrels a day is a lot of oil, though critics say the industry would never be able to generate that much and note the potential high environmental costs of drilling everywhere.

Plus OPEC might simply cut that amount of production to keep prices high.

Either way, it’s unlikely more drilling now would lower gas prices anytime soon.

Fewer regulations: Cutting regulations is another mantra of the American Right, and more regulations are indeed looming for the oil and gas industry.

It’s thought that Obama’s Environmental Protection Agency will propose new standards designed to cut air pollution and global warming on both refineries and fuels.

The oil industry says the new fuel standards alone could add anywhere from six to nine cents to a gallon of gas.

Yet not implementing those regulations wouldn’t lower the price of gas now — analysts aren’t expecting them to be put in place until after the election.

Plus, it’s uncertain they will really cost that much.

“Historically, the cost impacts [of additional regulations] have been estimated to be higher than they really are,” said Joseph Stanislaw, founder of J.A. Stanislaw Group, an energy and investment advisory firm.

Less taxes: As any good lobby group would, API has used every chance it gets to rally against proposals from the Obama administration that would eliminate up to $4 billion a year in tax breaks for the oil industry.

“No economist in the world will tell you gas prices can be reduced by increasing taxes,” said API’s Gerard.

Speculators are driving up gas prices – Opinion

Eliminating the tax breaks has been opposed by nearly every Republican politician as well.

But while eliminating those tax breaks might be bad for oil company shareholders, it’s hard to see how they would have much of a bearing on raising or lowering gas prices.

What is driving prices: Fundamentally, what politicians on both sides of the isle are missing is the fact that gas prices are not being driven by domestic policies.

They are being driven by oil prices, which are in turn rising mostly on fears over a confrontation with Iran.

“There’s a lot of oil out there right now, but people are scared,” said Stanislaw. “This is largely outside of the control of the United States.”  To top of page

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API: Oil & Gas industry pays the government nearly $90 million dollars a day

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WASHINGTON, March 2 (UPI) — U.S. President Barack Obama has it backward when he says the government is backing a billion-dollar oil subsidy, the American Petroleum Institute said.

Obama told an audience in New Hampshire that the oil industry was the recipient of $4 billion in subsidies backed by U.S. taxpayer dollars.

“Every time you go to the gas tank or fill up your gas tank, they’re making money. Every time,” the president said. “Now, does anyone really think that Congress should give them another $4 billion this year?”

But Jack Gerard, president and chief executive officer at trade group API, said the president had it wrong.

“The president has it backwards, our industry pays the government nearly $90 million dollars a day — the biggest contributor of government revenue than any other industry in the United States,” said Gerard.

U.S. lawmakers are sniping over domestic energy policies as gasoline prices in most U.S. markets move closer to $4 per gallon. Republican critics of the White House say Obama is blocking domestic energy production, which means higher oil prices.

Analysts, however, said tensions in the Middle East are likely contributors to escalating prices.

The White House states that U.S. dependence on foreign oil has gone down every year since Obama came into office in 2009. The president has said there “are no short-term silver bullets when it comes to gas prices.”

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