Saudi Arabias status as the worlds most powerful oil market player is being challenged.
The United States, with its huge proven reserves of shale oil, is shaking things up and changing the dynamics of the global crude market.
North America has experienced an energy boom, contributing to increasing global oil supplies. Oil and gas business in North Dakota, Texas, Oklahoma, Louisiana, Oklahoma and elsewhere have seen major expansions around shale plays.
According to the US Energy Information Administration (EIA), US oil production continues a steady upward climb despite lower oil prices. Increased domestic oil production has benefited the US by increasing employment, increasing revenues of state and local governments, lowering oil imports, and reducing the trade deficit.
This oil production renaissance is the result of hydraulic fracturing and directional drilling technology that has made it profitable to produce oil from shale formations.
Declining US petroleum imports
The Institute for Energy Research (IER) reports that the US oil renaissance has helped to increase the supply of oil worldwide due to the nation’s lower import volumes. US net oil imports dropped from 60% of US oil consumption in 2005 to 33% in 2013. That percentage has declined further to 28% at the end of September 2014. And forecasters believe that the percentage will decline to the low twenties as US oil production continues to grow.
This created strong demand for pipeline and equipment suppliers, as well as rail lines, but ultimately this can create a severe bottleneck in supplies. When oil was over $100, the profits flowed. At $90, some projects look less attractive, and if oil goes under $80, many projects may have to idle.
The North American energy boom has likely helped increase global oil supplies, which in turn lowered oil prices. Indeed, OPEC and other nations have warned that North America remains the main driver for the non-OPEC supply growth in 2014.
Lets consider two important points here the production and the price of oil
That is because there is a battle of a different kind going on between Saudi Arabia and the US, which has ramped up oil production at the fastest pace in more than 30 years.
Unconventional shale oil and gas has made the US a major energy producer again, not far behind Saudi Arabia.
Slower world growth has seen demand weaken slightly, while production has lifted to the same level because both Saudi Arabia and the US have ramped up output.