US oil production grew more in 2012 than in any year in the history of the domestic oil industry back to the Civil War
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.
- US oil production grew more in 2012 than in any year in the history of the domestic oil industry back to the Civil War (aei-ideas.org)
- Energy facts of the week: oil production highest since 1994, oil imports lowest since 1992, and oil jobs highest since 1988 (aei-ideas.org)
- Eagle Ford Shale helps boost U.S. oil production to 15-year high (transwestern-sa.typepad.com)
- Oil Industry Beats Buffett in Railroad Investments Surge: Energy (bloomberg.com)
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 email@example.com.
- Republicans say Obama is running out of excuses to delay Keystone pipeline (gds44.wordpress.com)
- Obama to get do-over on Keystone pipeline (cajunconservatism.wordpress.com)
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 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.
By John Rossomando /// April 30, 2012
- Obama officials rip into GOP gasoline bills (mb50.wordpress.com)
- EPA Official: EPAs “philosophy” is to “crucify” and “make examples” of US energy producers (mb50.wordpress.com)
- EPA Official on How To Deal With Non-Compliant Companies: ‘Hit Them as Hard as You Can’ & ‘Make Examples Out of Them’ (nicedeb.wordpress.com)
- EPA Official Quits Over Remark (myfoxchicago.com)
- EPA Is Sorry for the Analogy But Not the Context of Crucifying the Oil & Gas Industries (independentsentinel.com)
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.
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.
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.
- API: Oil & Gas industry pays the government nearly $90 million dollars a day (mb50.wordpress.com)
- Reid plans March showdown on oil-industry tax breaks By Ben Geman (mariokenny.wordpress.com)
- Interest groups protest Obama’s support for Oklahoma-Texas pipeline (newsok.com)
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.”
- Big Oil Calls Plan to End Subsidies ‘Discriminatory’ (jhaines6.wordpress.com)
- President Obama on Gas Prices and Oil Subsidies (whitehouse.gov)
- President Obama Demands End To Tax Subsidy “Giveaways” For Oil Companies (inquisitr.com)
- Obama Calls on Congress to Repeal Federal Subsidies for Oil Industry (mysanantonio.com)
- Obama loves oil – Not! (mb50.wordpress.com)
President Obama’s ambiguous call to “open” 75 percent of the country’s potential offshore oil and natural gas resources to exploration may sound generous, but the truth is, the areas containing those resources are technically already included in the upcoming 2012 to 2017 offshore leasing plan, and they are virtually the same areas where exploration and production have been allowed for decades.
Look beyond the president’s rhetoric to his record and it becomes clear that jobs and energy security are not high priorities for this administration. The shortsighted decision to deny the Keystone XL pipeline and the unnecessarily long moratorium on drilling in the deep waters of the Gulf of Mexico are but two examples.
Political uprisings and social unrest over the past year have highlighted the instability of oil-producing regions in the Middle East and North Africa, and the situation shows no signs of improvement. Just a few weeks ago, Iran threatened to shut the Strait of Hormuz, a critical transport route for 40 percent of the world’s oil. A robust domestic oil and natural gas industry can shield the U.S. market from such events and protect the American consumer. Unfortunately, our current policies have failed.
Around the same time as the Iranian announcement, the American Petroleum Institute unveiled a Quest Offshore Resources study showing that the deep-water drilling moratorium and subsequent permit slowdown forced 11 deep-water rigs to leave the Gulf of Mexico since 2010, taking their jobs and investments to the shores of Brazil, Africa and elsewhere. Those moves translated to a loss of $21.4 billion for our economy and an estimated 72,000 jobs in 2010 and 90,000 jobs in 2011, according to the study. We must do better.
An earlier Quest study rolled out by the National Ocean Industries Association showed that if permitting rates surpassed pre-2010 levels, 190,000 offshore industry-supported jobs could be created nationwide within the next two years without a single dime of government stimulus. The positive benefits of returning the Gulf-permitting rates to higher, more consistent levels are clear. But the Gulf represents only a portion of our nation’s offshore resources. Alaska’s outer continental shelf holds immense potential, with almost 10 billion barrels of oil and 15 trillion cubic feet of natural gas lying untapped beneath the ocean floor. Approval of exploration permits would mean 55,000 new jobs and $145 billion in new wages. The federal government would also see a significant amount of new revenue – approximately $193 billion.
There are also considerable resources off the coast of Virginia, where residents and state leadership support exploration. Unfortunately, the Department of the Interior has yet to allow the industry to move forward there. In addition to denying Virginia’s desire for an offshore lease sale, the department’s 2012 to 2017 proposed oil and gas leasing program keeps the eastern Gulf and the Atlantic and Pacific coasts off-limits to exploration and delays development in Alaska. This sends job creation elsewhere, and closes the door on economic growth.
Despite the vital revenue generated, jobs created, wages paid and increased energy security, less than 3 percent of the federal outer continental shelf is leased, leaving more than 97 percent of these resource-rich areas devoid of any permits. I cannot think of a more glaring, missed opportunity. We simply cannot continually place our nation at the mercy of hostile nations while we ignore our own energy potential. Significant oil and natural gas resources lie off our coasts and across our northern border, waiting to enhance our energy security and help stabilize fuel prices. We need to go get them. The time has come for Congress and the president to put aside rhetoric and ideological debates, pass meaningful legislation that will open our offshore domestic resources for exploration and development, stop sending our hard-earned dollars to hostile and unfriendly nations, and invest in America’s future.
- President Obama’s Domestic Energy State Of Delusion (mb50.wordpress.com)
- Obama’s Words Don’t Match with Action on Oil and Gas (mb50.wordpress.com)
- Natural gas sector set up by Obama to be sabotaged? (mb50.wordpress.com)
- 38 Million Acres Up For Grabs in Latest (and Last) GoM Lease Sale (gcaptain.com)
The Magnolia Petroleum Company, founded as an unincorporated joint-stock association on April 24, 1911, was a consolidation of several earlier companies, the first of which, the J. S. Cullinan Company, began operating a refinery at Corsicana, Texas, on December 25, 1898. The Corsicana Petroleum Company, planned as a crude-oil producer for the Cullinan plant, was organized in 1899. The George A. Burts Refining Company, organized in 1901 to absorb much of the crude oil from the Spindletop oilfield, became the Security Oil Company. In 1909 both the Navarro Refining Company, successor to the Cullinan Company, and the Security Oil Company were purchased by the John Sealy Company, which in 1911 became the Magnolia Petroleum Company, with Sealy as president (see SEALY, JOHN HUTCHINGS).
The Magnolia Company was originally capitalized at $2,450,000–24,500 shares at $100 each. In 1925 the company purchased the Corsicana Petroleum Company. Capitalization was $185 million in 1925. As Magnolia Petroleum Company became increasingly important in the southwestern states, the Standard Oil Company of New York began acquiring some of its stock. In December 1925 all of the Magnolia stock was exchanged for Standard Oil Company of New York stock, and the Texas properties were transferred to Magnolia Petroleum Company, chartered under Texas law on November 21, 1925, as a corporation to replace the former joint-stock association. The Magnolia Pipe Line Company was organized in November 1925, as a transporting subsidiary of the petroleum company. In 1931, when the Standard Oil Company of New York and the Vacuum Oil Company merged to form Socony-Vacuum Oil Company, Magnolia became an affiliate of the new company.
In 1949 Magnolia had a capitalization of $125 million, all shares owned by Socony-Vacuum except for qualifying shares owned by members of Magnolia’s board of directors. Magnolia Pipe Line Company was capitalized at $16.5 million, its stock being owned by Magnolia Petroleum Company except for qualifying shares held by directors of the pipeline company. Gross fixed assets of the company on December 31, 1948, were nearly $700 million, including the assets of the pipeline company, which had 8,670 miles of pipeline extending into nine states. General offices were in Dallas in 1949, when the company had permits to do business in twenty states and had some 12,500 employees. The Magnolia Petroleum Company merged with Socony Mobil Oil Company on September 30, 1959. Its operations became part of Mobil Oil Company, which had been formed in March 1959 as an operating division of Socony Mobil, responsible for all operations except marine transportation in the United States and Canada. Magnolia Pipe Line Company was not absorbed into Mobil Oil Company but remained a common carrier affiliate of Socony Mobil.
J. L. Terrell and James A. Clark
Timeline of Texas History – Magnolia Petroleum Company
- J Storm XVI Is 50th Jackup Commissioned At Bethlehem, Beaumont (mb50.wordpress.com)
Energy lease sales drop to zero as permitting remains slow under
Even as the Obama administration postures on behalf of deficit reduction and job creation, it continues to advance policies that undermine energy production in the Gulf region and lower federal revenue, Sen. David Vitter (R-La.) has pointed out in his correspondence with top officials in Washington D.C.
In a letter addressed to Interior Secretary Ken Salazar and Bureau of Ocean Energy Management Regulation and Enforcement (BOEMRE) Director Michael Bromwich, Vitter warned of a severe revenue falloff attached to declining energy lease sales.
“Under the Obama administration’s management, revenue from our offshore lease sale program has gone from $10 billion to nothing in just three years,” Vitter said. “Revenue cannot be generated from sales that do not happen, and jobs cannot be created on leases that private industry cannot acquire. We’re in a severe fiscal crisis and we’re facing significant economic challenges related to job creation, yet the administration continues to neglect our offshore resources.”
In fiscal year (FY) 2008 revenue from bonus bids on offshore leases was approximately $10 billion, but for FY 2011 that amount is down to zero, according to Vitter’s letter.
Unless the administration reverses course, Vitter anticipates “long-term economic impacts that include lost jobs, lost royalties and lost rental fees.” Companies will be reticent to own a lease if they cannot be reasonably certain that exploration plans or permits will be approved, he added.
“The Obama administration has virtually put a stop to energy development in federal waters,” Kish said. “This is like planting seeds, if the government won’t allow to the seeds to be planted now, they are preventing future production. We are talking about a lost generation of economic activity.”
In September, President Obama rolled out a new deficit reduction plan built around income tax increases for higher income Americans.
“We can’t just cut our way out of this hole,” Obama said during a speech at the White House. “It’s going to take a balanced approach. If we’re going to make spending cuts … then it’s only right that we ask everyone to pay their fair share.” Obama also said that would veto any deficit reduction plan that includes only spending cuts and no tax increases.
“When you include the $1 trillion in cuts I’ve already signed into law, these would be among the biggest cuts in spending in our history,” Obama continued. “But they’ve got to be part of a larger plan that’s balanced –- a plan that asks the most fortunate among us to pay their fair share, just like everybody else. And that’s why this plan eliminates tax loopholes that primarily go to the wealthiest taxpayers and biggest corporations –- tax breaks that small businesses and middle-class families don’t get.”
But the slow pace of permits for oil drilling also contributes to the deficit, Vitter explained in a previous letter to administration officials. The right mix of policies could unleash America’s abundant supply of domestic energy resources, which would in turn boost revenue into the federal treasury, Vitter argued.
“I share the frustration of Louisianians and Gulf Coast residents with the disparity between the president’s rhetoric and the Interior Department’s actions,” Vitter said. “The administration’s policies have led to massive deficits and job losses, especially in Louisiana, and it’s time for the president to stop lecturing about job creation and allow our energy industry workers to get back to work.”
Without a higher volume of additional permits, the number of active oil rigs will continue to decline in the Gulf, Vitter warned in one of his earlier letters. The 2011 permitting rate is well below the historical average, Vitter observed.
As of early September, “there were 19 floating units operating in the Gulf, up from four in the third quarter of 2010, but down from the average of 28 recorded in the 2007-2009 period,” he wrote.
Up to 20 oil rigs could leave the Gulf, in addition to 11 that have already left, since the administration’s moratorium on deepwater oil and gas drilling went into effect in May 2010, the Pelican Institute has reported.
If U.S. companies were permitted to drill with fewer regulatory hurdles, they could boost government revenues by $800 billion and generate over a million new jobs by 2030, according to API.
But even with a change in administration heading into 2013, the Gulf region is not likely to experience a robust recovery in the short term, Kish, the IER policy expert, warns.
“It will take time to correct these policies,” Kish said. “The Obama administration has shifted the entire ground on which the Gulf of Mexico operates.”
- Collateral Damage: Lost Gulf Rigs from Obama Obstructionism (10 down, more to go?) (mb50.wordpress.com)
- Is Mexican Gulf Energy Production Recovering? (mb50.wordpress.com)
- Louisiana Remains on the Receiving End of Washington D.C.’s Worst Regulations (mb50.wordpress.com)
- Vitter to block Interior nominee (politico.com)
- No Drilling, No Jobs, No Money (papundits.wordpress.com)
- Obama’s Real Energy Policy (mb50.wordpress.com)