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Could U.S. soon surpass Saudis as leading oil producer?

“U.S. production growth is only one of several key factors that determine when, or even if, such a milestone might be reached,” said the latest EIA report.

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Significant increases in U.S. production of crude oil and other liquid fuels and the outlook for further growth have focused attention on the possibility that America could soon surpass Saudi Arabia to become the leading global producer, says the Energy Information Administration (EIA) of the U.S. Department of Energy.

A higher level of U.S. oil production could significantly boost the U.S. economy, and could also reduce global oil prices through its effect on the global crude oil and product market balances. However, noted the EIA, regardless of any future crossing of U.S. and Saudi production paths, the timing of which would depend on which particular accounting convention is applied, “Saudi Arabia will continue to play a unique and vital role in world oil markets.”

“U.S. production growth is only one of several key factors that determine when, or even if, such a milestone might be reached,” said the latest EIA report.

Saudi Arabia, a leading member of the Organization of the Petroleum Exporting Countries (OPEC), plays a unique role as the only oil producer with significant spare production capacity. Saudi Arabia operates as the world's main swing producer to balance the global market in response to supply or demand changes.

Because nearly all other OPEC and non-OPEC producers operate at their effective capacity, Saudi production levels can move significantly in response to economic fluctuations affecting global oil demand, changes in non-OPEC production capacity outside the United States, and changes in production capacity of OPEC members other than Saudi Arabia. A more detailed discussion of these drivers and their impacts is presented in the Dec. 19 edition of This Week In Petroleum.

In addition to these factors, which together drive the large uncertainty in the future path of Saudi production, the choice of accounting conventions for measuring liquids production also affects which country is considered the world's leading producer at a given date.

Using the broadest definition of liquids production (encompassing crude oil, condensate, natural gas liquids, biofuels, and refinery gain), the difference between U.S. and Saudi production is currently estimated by EIA to be 0.6 million barrels per day (bbl/d), considerably smaller than the gap of 3.5 million bbl/d when the comparison is restricted to crude oil production only.

EIA stated that, “Clearly, any prediction of a crossing in U.S. and Saudi production paths is highly dependent on many difficult-to-forecast drivers that primarily impact the level of Saudi production. For this reason alone, one simply cannot attach high confidence to any forecast that suggests the specific timing of any future crossings or re-crossings. And, as already noted, any declaration of whether a crossing has occurred will inevitably also reflect accounting conventions even after production data are already in hand.”

The Trucker staff can be reached to comment on this article at editor@thetrucker.com.

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