So that the U.S. is not dependent on foreign oil supply amid disturbances in Libya and economic sanctions on Iran, the United States continued its relentless rise in crude oil production in 2013 and 2014. In its statement the International Energy Agency (IEA) said that exceeding even the most bullish of expectations, a surge in U.S. oil production was seen last year.
However, now, the IEA has warned that surging U.S. oil production could hit a wall in the coming years if the country maintains its ban on crude exports. According to the agency America’s crude output has surged in recent years thanks to shale oil production and the last year, the country’s oil production rose 15% which is the fastest absolute annual growth in any country in two decades.
Nevertheless, relentless oil production may cause several unwelcome eventualities as according to IEA by next year, imported oil of a similar quality to the crude produced from shale could be almost entirely backed out of U.S. coastal refineries. It will definitely generate problems as the U.S. tightly regulates exports of its oil and that limits the market for its new oil supply.
Regulatory Issues regarding Oil Exports in the U.S. are of Great Concern
According to IEA the growing volumes of light tight oil that cannot leave North America are increasingly posing a challenge to industry, putting the spotlight on the U.S. crude oil export ban. This may hit wall, particularly, as currently refinery, pipeline and crude rail capacity in the country have expanded rapidly to accommodate the extra supply.
However, as the U.S. refineries are processing more oil than they have in eight years, price stagnation like what was seen throughout 2013 may happen again. Earlier, the Energy Information Administration (EIA) in December last year had admitted that the U.S. would continue to produce copious amounts of oil and natural gas through at least 2016.
Now, the data from EIA are being attested by IEA; however, IEA is showing concern about it as it may hit the wall and heavily impact oil prices in the U.S. Though it may sound good for the U.S. which wants to become completely energy independent by 2020, it may raise the issue of the looming crude ‘wall.’
The U.S. must plan how to consume that produced oil so that oil prices remain competitive and not stagnate that may risk investments.
To contact the reporter of this story: Jonathan Millet at firstname.lastname@example.org