U.S. production disrupts global flows of crude oil
Things are slowing down at the nation’s largest oil-import hub.
The Louisiana Offshore Oil Port, which six years ago imported more than 1 million barrels a day from countries including Saudi Arabia, Nigeria and Iraq, is receiving just half of that from overseas. The trend is reflected at harbors from Mississippi to Pennsylvania. What’s more, with U.S. output soaring to a 31-year high, neighboring Texas has become the port’s second-biggest supplier.
“U.S. oil production has significantly changed the flows of oil around the world, and LOOP is at the fulcrum,” said Jamie Webster, head of global oil markets at IHS Inc. “We’re now essentially receiving nothing from Nigeria. This is a huge change. I’m an oil markets man and not an economist, but in general, this is a big stimulus” for the United States.
Booming oil and gas production spurred more than 159,000 jobs between 2007 and 2013, Bureau of Labor Statistics data show. The country will be self-sufficient in energy by 2030, BP Plc says.
A four-decade ban on exporting most of the country’s crude has stranded the bulk of America’s surging production within the nation’s borders, blocking inbound global shipments. Some cargoes permitted for export, such as those from Alaska, have begun moving overseas. South Korea last month received its first shipment of Alaskan oil in more than a decade.
Oil that the United States once imported floods world markets, driving down prices 28 percent since June. That has helped bring $3 gasoline back and provided what Citigroup Inc. describes as a $1.1 trillion boost to the global economy. Lower energy prices will translate into savings for Americans and will probably boost spending, said Amy Myers Jaffe, executive director of energy and sustainability at the University of California at Davis.
“It’s not just that people will have this benefit of lower gasoline prices, they’ll have this whole benefit of having a stronger U.S. economy and more jobs,” Myers Jaffe said.
A sustained stretch of low prices is unlikely to stop soaring output from major U.S. fields, with executives of oil companies including Continental Resources Inc. Chairman Harold Hamm and Occidental Petroleum Corp. Chief Executive Officer Stephen Chazen saying last month that production could be sustained even if prices fall lower.
“Oil prices are lower, but they’re not low enough to really put a big pinch on that activity,” said Ken Medlock, senior director of the Center for Energy Studies at Rice University’s Baker Institute in Houston. “You probably would need to see oil prices come off another $10 to $20 to see that fade.”