U.S. crude oil production, rising steadily since 2008, is likely next year to hit its highest level since 1972 while Iraq’s output, despite unrest there, is expected to hold steady, according to a forecast Tuesday by the U.S. Energy Information Administration.
Spurred by the use of hydraulic fracturing or fracking in shale rock deposits, U.S. oil production has jumped from 5.0 million barrels per day in 2008 to 7.4 million last year and is expected to average 8.5 million this year and 9.3 million next year, according to the EIA, the analytical arm of the Department of Energy.
“Texas and North Dakota now account for almost half of total U.S. oil production,” said EIA Administrator Adam Sieminski, noting Texas’ monthly oil output recently topped 3 million barrels per day for the first time since 1977 and North Dakota’s oil production hit a record 1 million.
This boom, along with a rise in natural gas liquids production, has dramatically lowered petroleum imports. The share of U.S. liquid fuels consumption met by net imports, down from 60% in 2005 to 33% in 2013, is expected to fall to 22% in 2015, which would be the lowest since 1970.
The United States and Canada are expected to account for most of the world’s projected growth in production of oil and other liquid fuel through 2015 while China and less developed countries will drive most of the growth in consumption, according to the EIA’s July forecast.
“The conflict in Iraq is expected to limit previously forecasted growth in oil exports from that country,” says the EIA, adding it will reduce the surplus oil production capacity of the Organization of the Petroleum Exporting Countries and boost average Brent crude oil prices through 2015 more than previously expected.
The EIA is lowering its forecast for Iraq’s oil production growth by about 0.3 million barrels per day in both 2014 and 2015, expecting it will not exceed 3.3 million – its average level during the first half of this year. To offset this dip, it expects Saudi Arabia to maintain higher production through 2014.
Last month, Islamic Sunni militants seized control of Iraq’s northern city of Mosul. Yet most of Iraq’s oil production, which recently hit a 30-year high, has occurred in the south, and its exports are coming from terminals near the southern city of Basra.
Raad Alkadiri, a senior research director at IHS Energy, a consulting firm, said he expects oil and gas infrastructure in Iraq’s north “will be vulnerable to repeated attack,” but he doubts southern production and exports will be “directly affected.”
The EIA forecast also expects U.S. gasoline prices to fall in the next few months, dropping to $3.61 a gallon in September, while home electricity prices will rise 3% this year – the biggest increase since 2008. It expects U.S. coal production, which has generally been in decline, to rise 2.7% this year. It says the power sector is looking to coal to meet its electricity demand, because natural gas prices jumped nearly 30% from last year.