Currently available American oil pumping capacity vs. actual production
The supply and demand conversation seems dominated by the long lead time to ramp up new production.
My question: If all limits were lifted on existing or near term (3-6 months) available oil production, how much would that add to current production levels ?
In other words, at what percent of total production capacity are we currently operating ?
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Answer by Rick Bateman
Most of what you're looking for can be found here, nice chart and everything.
Something else, though. Oil operates in a futures market, and is a global commodity, which makes for an interesting situation. Approving production now for a coming supply will lower prices now because of how the market is structured.
Oil can be bought at a price depending on what is thought to be the future cost. This is good for consumers, despite stories of "speculators" moving prices. We've all done this, when we pass by one gas station thinking that another down the road usually has less expensive fuel, or the price is on the way down so we let the tank get lower than we normally would before refueling. We speculate who (which grocery store) will have a better price when (pre-holiday sale, coupons in Sunday's paper) on a very regular basis.
It is tricky with oil, since one must factor in known recoverable resources, possible advances in technology, political situation (the United States) or political stability (Libya), et al. In short, hundreds of companies are hedging their bets. When Libyan oil production went from 1.6 million bbl per day to zero during their civil war, the lost of that capacity was hedged by other countries stating they would up their capacity in the future to make up for the loss, and contracts were created stating thus. This lessens volatility and stabilizes prices.
In the global market, this can helps to stabilize prices for goods and services also. Southwest Airlines had great success buying fuel at less than half the cost of their competitors for a years. They've also lost on the gamble, while others have won. Increased competition is better for the consumer, in the end. We pick who won, the others can live and learn.
It's a lot and it's complicated, sorry about that. I tried to make it easier for those who don't read the Wall Street Journal as much as I do (I also work in investments).
whatmeworry: "Approving production now for a coming supply will lower prices now because of how the market is structured."
This has been my impression, i.e., a signal of simply a commitment to significantly ramp up American production and maximize available capacity -- in and of itself -- can postively affect gas prices. And not by mere pennnies ?
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- · March 21, 2012 at 6:09am
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Rick Bateman: I found the charts we need! Spot price for crude dropped about $20 in a month just from the announcement. Other market signals are mentioned here.
A chart for gas prices is found here on page 2 (pdf). Gas prices dropped about $1.50/gallon in the first 1/4 after the offshore drilling ban was lifted. Hope it helps.
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- · March 21, 2012 at 12:07pm
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whatmeworry: Yes!!! That's what I'm talking about ! A 12 % decline in the 45 day average price/barrel in less than a month -- simply by a major commitment to explore (let alone increase current pumping).
The rest of the world takes our word very seriously when we publicly commit to actions that reinforce our self-reliance for oil.
Thank you !
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- · March 22, 2012 at 5:31am
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whatmeworry: Not considering potential supplies that we are not able to currently access, how much has various moratoria, regulation and whatever other limits, suppressed pumping quantities ? Are currently 'approved' wells -- regardless of whether they are on public or private lands -- all pumping at full capacity (aside from normal downtime maintenance) ? If not -- ideas on what percent we are pumping at currently ?
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- · March 22, 2012 at 5:44am
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Answer by Tom Lindholtz
I did a simple Google search. According to one web site: "Until March 28, 2000 when OPEC adopted the $22-$28 price band for the OPEC basket of crude, real oil prices only exceeded $30.00 per barrel in response to war or conflict in the Middle East. With limited spare production capacity, OPEC abandoned its price band in 2005 and was powerless to stem a surge in oil prices, which was reminiscent of the late 1970s."
That suggests that production limitations are probably not a big factor in the price of oil at the present time. But if you're interested in more detail you can read the full paper at the above link.
Answer by Rick Bateman
One more thing, which is more to your original question:
It's difficult to say what percent of production we are at relative to what's available, because our recoverable reserves are always increasing, according to the Energy Information Administration. More reserves are found, and they are increasingly accessible due to advances in technology. We have a bottleneck in transportation, though.
Bakken oil is being transferred by train, which is inefficient relative to what a pipeline could carry. Part of the Keystone XL will solve this problem, which would make Warren Buffet very unhappy.
Once oil is transferred to Cushing, OK, it is routed to refineries across the country. Then we will have a bottleneck in refinement, as it has been a few decades since a new plant has been built.
Answer by Tom Lindholtz
I ran across this graphic the other day. It is a little bit tangental to your question, because the terms that are usually used don't really address the oil that is "suspected" to be there but that is legally unavailable (due to failure of the government to permit drilling), or that is economically or technologically impractical at the present time. The great irony for libs is that if they succeed in driving the price of oil higher -- in order to make wind and solar more feasible -- they also increase the amount of oil that is economically practical. Bottom line, petroleum packs a bigger energy punch than any of the alternatives available for transportation. And only nuclear packs a bigger punch for stable uses.
whatmeworry: Agree completely - green is highly inefficient. How did William Tucker state it in Terrestrial Energy ?... Green energy is as efficient as cutting steel with a butter knife ?
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- · March 22, 2012 at 5:35am
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Answer by Rick Bateman
"whatmeworry: Not considering potential supplies that we are not able to currently access, how much has various moratoria, regulation and whatever other limits, suppressed pumping quantities ?"
If fossil fuels are already being extracted, there aren't moratoria in place, so no decline in going after resources there. When land is leased, there is exploration and drilling where possible. If there's no exploration, there's really no way of knowing how much fossil fuel is being missed due to a regulatory ban. I'm not sure if there's an answer to your question the way it is asked, but I'll keep thinking on it.
As far as lost production on 33 working wells from Obama's moratorium on Gulf drilling:
2010: 110,000 bbls/day
2011: 250,000 bbls/day
There are also various lawsuits to prevent drilling in Prudhoe Bay and other areas on leases already approved, that may take some time to find a compendium.
Tom Lindholtz: But there was a moratorium imposed in the Gulf at one point. Daily Caller had a story about a year ago about a company going bankrupt as a result. I can't find more current info.
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- · March 27, 2012 at 5:27am
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Tom Lindholtz: Here's another interesting comparable stat, but also about a year old.
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- · March 27, 2012 at 5:32am
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