Texas to become world’s number 3 oil producer, passing Iran

Plunging drilling costs have sparked an explosion of production out of the Permian Basin of West Texas. In fact, Texas is pumping so much oil that it will surpass OPEC members Iran and Iraq next year, HSBC predicted in a recent report.

If it were a country, Texas would be the world’s No. 3 oil producer, behind only Russia and Saudi Arabia, the investment bank said.

“It’s remarkable. The Permian is nothing less than a blessing for the global economy,” said Bob McNally, president of Rapidan Energy Group, a consulting firm…

Texas is producing so much oil that it will soon be bumping up against pipeline capacity. Some producers are already selling at a discount because of the limitations. Another problem is a shortage of labor, though that will likely be good news for the state and for people moving to Texas to find work.

The boom in Texas is one reason the U.S. is set to become the world’s number one oil producer. Last week, U.S. production reached an all-time high of 11 million barrels per day:

In the years leading up to the shale oil boom, crude oil exports from the U.S. were nearly nonexistent. There were two reasons for that.

First, following the 1973 OPEC oil embargo, a crude oil export ban had been enacted as part of an energy bill that aimed to mitigate future oil crises. The crude oil export ban restricted crude oil exports from the U.S. to all countries besides Canada.

But even if the ban hadn’t been in place, U.S. oil production severely declined for over three decades after 1970, even as U.S. crude oil consumption grew.

Why The U.S. Exports Oil
Robert Rapier
Robert Rapier
Contributor
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Sep 30, 2017, 09:00am 14,645 views #PowerUp

The Eagle Ford crude oil tanker sails out of the the NuStar Energy dock at the Port of Corpus Christi in Corpus Christi. Photographer: Eddie Seal/Bloomberg

In the years leading up to the shale oil boom, crude oil exports from the U.S. were nearly nonexistent. There were two reasons for that.

But even if the ban hadn’t been in place, U.S. oil production severely declined for over three decades after 1970, even as U.S. crude oil consumption grew. So, over time, there simply wasn’t as much crude oil available for export. (I use that phrasing with the caveat that the U.S. has been a net importer of crude oil and petroleum products since 1949. More on that below).

As crude oil production in the U.S. surged, the dynamics began to change. Aided by the crude export ban, the longtime West Texas Intermediate (WTI) premium over internationally traded Brent crude vanished and WTI began trading at a discount.

U.S. crude oil producers had to sell their oil to U.S. refiners, who were happy to refine the discounted crude and then export the finished fuel products at full price (because the ban didn’t cover finished products).

Crude oil producers lobbied for an end to the export ban, and in late 2015 they got their wish when President Obama signed into law the Consolidated Appropriations Act, 2016.

A wide price differential developed between heavy, sour crudes and light sweet crudes like WTI and Brent.

Heavy oil refiners would rather simply continue to import oil more suited to their needs, while the light, sweet crudes coming out of the U.S. shale plays are often a better fit for certain foreign refineries.

https://www.forbes.com/sites/rrapier/2017/09/30/why-the-u-s-exports-oil/#51e2bed73b07

U.S. Oil Exports Continue To Break Records
https://oilprice.com/Energy/Crude-Oil/US-Oil-Exports-Continue-To-Break-Records.html

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