Conditions have changed since January, and we might expect some additional stimulus from the Fed at the next FOMC meeting.
Author Archives: James_Hamilton
Shale oil and tight oil
Since 2005, the “total oil supply” for the United States as reported by the Energy Information Administration increased by 2.2 million barrels per day. Of this, 1.3 mb/d, or 60%, has come from natural gas liquids and biofuels, which really shouldn’t be added to conventional crude production for purposes of calculating the available supply. Of the 800,000 b/d increase in actual field production of crude oil, almost all of the gain has come from shale and other tight formations that horizontal fracturing methods have only recently opened up. Here I offer some thoughts on how these new production methods change the overall outlook for U.S. oil production.
Current economic conditions
I see both dark clouds and rays of hope.
Update on U.S. gasoline prices
Two weeks ago, I commented on the tendency of U.S. retail gasoline prices to follow the price of Brent crude oil, anticipating on the basis of the price of Brent, then at $91.50, that we might expect to see average U.S. retail gasoline prices, then at $3.47, to fall an additional 35 cents/gallon. The gasoline price has since come down about 11 cents. But with Brent now surging back up near $100, this is about all we can expect.
Natural gas liquids
According to the Energy Information Administration, in March the United States produced a “total oil supply” of 10.8 million barrels per day, which was 2.1 mb/d more than in January 2005. But if you just rely on those aggregate numbers, you’ll miss some very important trends.
Links for 2012-06-27
Quick links to another proposal for Europe, and estimates of U.S. consumer benefits from lower natural gas and gasoline prices.
Gasoline prices coming down
West Texas Intermediate crude oil, which had been selling for $105 a barrel at the end of March, fell to $80 a barrel last week, while Brent has come from $125 down to near $90. These price declines will translate into substantial savings for U.S. consumers in the weeks ahead.
Europe in 1931
I was at a conference at the Cato Institute two weeks ago discussing some research by Dartmouth Professor Doug Irwin on the role of the gold standard in the Great Depression of 1929-1933. If you’re interested, you can see a written version of my comments, the slides from my presentation, or a video of the session (my comments begin a little more than half way in). Here I’d like to relate some of the discussion of what happened in Europe in 1931, and comment on some of the parallels with what is going on today.
Options for Europe
This problem is not fixing itself.
Peak oil and price incentives
Here I describe some interesting new research on modifying Hubbert’s model of peak oil to take into account the incentives for additional production that higher oil prices would be expected to bring.