Might need to delay ‘peak oil’ a bit.
More interesting, I’d estimate it would take about a 5 million barrel a day ‘shift’ in net demand to dislodge the Saudis as swing producer, as they can only cut production by less than that much to sustain price should that happen.
In other words, a combination of increased non opec supply and reduced world demand of 5 million bpd would force a cut in production of that much for the Saudis to be able to continue to set price, from their current production level of about 8.5 million bpd.
And along with these ‘new drilling methods’ Iraq is looking to add over 5 million bpd in capacity over the next several years.
The question is what will happen with demand, and looks to me the US and Europe are starting to go the other way and reduce gasoline demand via conservation (higher mpg’s in vehicles) and shifting to alternative fuels, directly and indirectly.
So what’s the Saudi’s best move here?
Keep prices high a long as possible and get all the wealth they can before prices collapse?
Or cut price in an attempt to discourage the forces at work that are threatening their pricing power?
February 9 (AP) — A new drilling technique is opening up vast fields of previously out-of-reach oil in the western United States, helping reverse a two-decade decline in domestic production of crude.
Companies are investing billions of dollars to get at oil deposits scattered across North Dakota, Colorado, Texas and California. By 2015, oil executives and analysts say, the new fields could yield as much as 2 million barrels of oil a day—more than the entire Gulf of Mexico produces now.
This new drilling is expected to raise U.S. production by at least 20 percent over the next five years. And within 10 years, it could help reduce oil imports by more than half, advancing a goal that has long eluded policymakers.
“That’s a significant contribution to energy security,” says Ed Morse, head of commodities research at Credit Suisse .
Oil engineers are applying what critics say is an environmentally questionable method developed in recent years to tap natural gas trapped in underground shale. They drill down and horizontally into the rock, then pump water, sand and chemicals into the hole to crack the shale and allow gas to flow up.
Because oil molecules are sticky and larger than gas molecules, engineers thought the process wouldn’t work to squeeze oil out fast enough to make it economical. But drillers learned how to increase the number of cracks in the rock and use different chemicals to free up oil at low cost.
“We’ve completely transformed the natural gas industry, and I wouldn’t be surprised if we transform the oil business in the next few years too,” says Aubrey McClendon, chief executive of Chesapeake Energy, which is using the technique.
Petroleum engineers first used the method in 2007 to unlock oil from a 25,000-square-mile formation under North Dakota and Montana known as the Bakken. Production there rose 50 percent in just the past year, to 458,000 barrels a day, according to Bentek Energy, an energy analysis firm.