Friday, July 8, 2016

U.S. Takes Second Place in World Oil Reserves

The top oil-producing countries in the world are Russia, Saudi Arabia, Canada, and the United States. A few short years ago, the US was dead last in that hierarchy based on estimates of total recoverable oil throughout each country. As shown in Rob Nikolewski's L.A. Times article, a recent study by Rystad Energy has shown that the United States has beaten out some of its former competition, taking second place behind Canada as one of the world's top oil producers.

The amount of "recoverable oil reserves" is calculated based on how much of a country's oil is both technologically and economically feasible to extract. In other words, if it is too deep to get out or will cost more money to mine than can be earned in the market, then it isn't calculated in the country's total reserves. Leaders in the oil industry have determined that the United States' improved position in the market is likely due to technological advancements, especially those that enable the procurement of shale oil.

Shale oil is a type of oil found in some sedimentary rocks that can be extracted pressurized drilling. It is a type of oil that was previously ignored or not considered useful because it was harder to extract. However, since much of the "easier to access" oil has been extracted and used up over decades of drilling, the technology advanced to keep up with demand. Additionally, other forms of drilling technology, such as hydraulic fracturing, or "fracking," which involves the pumping of pressurized fluid into otherwise-empty oil well in order to force any remaining oil out have added to US reserves. Texas by itself has over 60 billion barrels worth of shale oil, an amount comparable to the total oil reserves in the entire country of Mexico.

The Rystad study concluded that there are approximately 2.1 trillion barrels of oil globally, from over 60,000 oil wells. Over half of the reserves in the US are shale oil deposits, which, since they are more difficult to extract, can incur extra costs. Right now, oil prices are very low, which might seem like a good thing to the average consumer. However, when prices stay low for too long, producers can;t extract more oil in an economical manner, which reduces the total amount in the market, which can cause prices to shoot up.

According to one economist, if oil prices stay below $50 per barrel, miners will not put in the investment to tap shale oil reserves. If prices get closer to $100, he predicts that the US will provide a significant portion of the oil market over the next few years. So, even though the US has plenty of oil deposits in Texas, California, South Dakota, and Alaska, and technology can help the mining along, prices will have to go up in the short-term in order to keep gasoline prices steady in future years.

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