Oil and Natural Market Outlooks and Energy Policy

Transcription

1 Energy Market Update Oil and Natural Market Outlooks and Energy Policy Rayola Dougher API Senior Economic Advisor,

2 The price of oil has fluctuated sharply before Inflation-adjusted 2014 $/barrel Iran/Iraq war PDVSA strike Iraq War Asian Growth Low spare capacity Libyan Uprising Gulf War OPEC cuts 4.2 million 9/11 Recession Supply surplus 0 Sources: Inflation-adjusted average refiners acquisition price for crude oil

3 Changes in gasoline and diesel prices closely track changes in crude oil prices Average prices as of April 22, 2015 $5.00 Crude Oil $1.34 Gasoline $2.49 Diesel $2.79 $4.00 $3.00 $2.00 $1.00 $0.00 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Sources: NYMEX (WTI crude oil) and AAA (gasoline and diesel)

4 Many factors affect the price of oil, but in the end it comes down to supply and demand Source: EIA

5 U.S. oil production is increasing as a result of technological innovations 10 (millions of barrels per day) % growth Note: Bars in red show EIA s Short-term Energy Outlook forecast. Source: Energy Information Administration.

6 SHALE ENERGY PROVIDES A NATIONAL OPPORTUNITY Shale Resources, Lower 48 States Current Shale Resources Prospective Shale Resources Basins Stacked Resources Shallowest/ Youngest Mid-Depth/ Mid-Age Deepest/Oldest Current and prospective resources and basins in the continental US Source: EIA based on data from various published studies updated May 9, 2011

7 These seven regions accounted for 95% of U.S. oil production growth and all U.S. natural gas production growth from Source: EIA, Drilling Productivity Report

8 Horizontal Utica Point Pleasant Well Activity in Ohio Source: Ohio Department of National Resources

9 Utica oil production has more than tripled over the last year Barrels per day Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Source: EIA Drilling Productivity Report, March 2015

10 U.S oil production from shale has increased rapidly in recent years Million barrels per day Utica Source: EIA

11 Utica oil production continues to increase even as rig counts decline New-well oil production per rig (barrels /day) Rigs Source: EIA Drilling Productivity Report, March 2015

12 The cost to drill an oil and shale-gas well in Ohio is higher than in most other states Average cost per foot $700 $600 $500 $400 $300 $200 $100 $0 Source: API Annual Drilling Survey

13 Growth in U.S. oil production has largely offset the growth in global oil supply disruptions Growth in Global Oil Supply Disruptions (mmb/d) Growth in U.S. Crude Oil Production* (mmb/d) Non- OPEC OPEC Mar 2012 Sep 2012 Mar 2013 Sep 2013 Mar 2014 Sep 2014 Mar Mar-2012 Sep-2012 Mar-2013 Sep-2013 Mar-2014 Sep-2014 Mar-2015 Source: EIA * Includes hydrocarbon gas liquids, biofuels, and refinery processing gains.

14 World crude oil and liquid fuels production growth Million barrels per day OPEC North America Russia and Caspaian Sea North Sea Latin America Other Non-OPEC Source: EIA, Short-term Energy Outlook, April 2015

15 Non-OPEC crude oil and liquid fuels production growth 3 (million barrels per day) United States Brazil Canada Malaysia China Kazakhstan Oman Australia India Norway Sudan/S. Sudan Azerbaijan Other North Sea Vietnam Gabon Colombia Syria Egypt Russia Mexico United Kingdom Source: EIA, Short-term Energy Outlook, April 2015

16 World growth in crude oil production surged ahead of growth in consumption in (million barrels per day) Production Consumption Source: EIA, Short-term Energy Outlook, April 2015

17 Crude oil and petroleum product imports have declined as a share of consumption 70% 60% 50% 40% 30% 20% 10% 0% Source: EIA

18 EIA price forecast WTI Crude a ($/barrel) Brent Crude ($/barrel) Gasoline b ($/gallon) Diesel c ($/gallon) Heating Oil ($/gallon) Natural Gas d ($/mcf) Electricity (cents/kwh) Projected 2016 Projected a West Texas Intermediate b Average regular pump price c On-highway retail d Residential average Source: EIA, Short-term Energy Outlook, April 2015.

19 U.S. is the number one producer of natural gas thanks to technological innovations Billions of cubic feet per day % growth Note: Bars in red show EIA s Short-term Energy Outlook forecast. Source: Energy Information Administration.

20 Utica natural gas production nearly tripled over the last year Mcf/day Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Source: EIA Drilling Productivity Report, March 2015

21 U.S. natural gas production from shale has increased rapidly in recent years Utica Source: EIA

22 Utica natural gas production continues to increase even as the rig count declines New-well gas production per rig (thousands cubic feet/day) 5,000 3,750 2,500 1,250 0 Rigs Source: EIA Drilling Productivity Report, March 2015

23 Rising US natural gas output pushed natural gas prices to record discounts against international gas prices $/Mmbtu Japan LNG German Import Price U.K U.S. Henry Hub Source: BP Statistical Review of World Energy 2014.

24 Shale energy revolution has pronounced impact on energy-intensive industries Percent Increase to Industrial Production Indices due to the Unconventional Activity Value Chain Iron & Steel Resins & Synthetic Material Basic Organic Chemicals Plastics and Rubber Fabricated Metal Agricultural Chemical Nonmetallic Mineral Petroleum & Coal Machinery Total Manufacturing 2.2% 6.7% 1.7% 6.0% 1.5% 7.1% 1.5% 4.1% 4.6% 1.4% 3.2% 4.8% 1.2% 6.9% 1.2% 3.5% 4.1% 1.0% 5.8% 0.4% 3.3% 4.0% 1.3% 3.5% 3.9% 7.4% 8.1% 9.5% 7.7% 6.5% Source: IHS Global, America s New Energy Future, Volume 3: A Manufacturing Renaissance.

25 Shale production is offsetting declining production from other U.S. oil and natural gas resources 10 U.S. Crude Oil Production by Source (millions of barrels per day) 40 U.S. Natural Gas Production by Source (trillion cubic feet per year) Tight Oil Shale Gas Lower 48 Onshore Conventional 2 Lower 48 Offshore 1 Alaska Source: EIA, Annual Energy Outlook Lower 48 Onshore Conventional Lower 48 Offshore Coalbed methane Tight Gas Alaska

26 EIA forecasts relatively low natural gas prices for decades Henry Hub $/MMBTU Forecast Source: EIA, Annual Energy Outlook 2015

27 Oil and natural gas development equals more jobs Construction Industry Drilling Industry Chemical Industry Trucking Industry Hospitality Industry Steel Industry

28 Employment contribution of oil and natural gas development in Ohio 190, , , , Q Q Q2 2014Q2 Source: Ohio Department of Job and Family Services, Ohio Shale, January 2015

29 Ohio Jobs Supported by Shale Development Direct Jobs Indirect Jobs 120 New Jobs Ken Miller Supply Wooster, Ohio CHK correspondence with company 160 New Jobs 508 Jobs Saved US Steel Lorain, Ohio ml 449 New Jobs 489 Jobs Saved Republic Steel Lorain, Ohio ml 100 New Jobs BP Warren, Ohio CHK correspondence with company 120 New Jobs TMK IPSCO Brookfield, Ohio Jobs/LEcE8PoD3UeQAJABgGhFKQ.cspx 700 New Jobs Baker Hughes Massillon, Ohio New Jobs 100 Jobs Saved V&M Star Youngstown, Ohio New Jobs Ariel Corp Mt. Vernon, Ohio s/2013/02/10/well-positioned.html 150 New Jobs Weatherford Youngstown, Ohio 70 New jobs State of Ohio: Ohio Dept. of Natural Resources (ODNR) Columbus, Ohio Field/Pv3k_rZXskm-N2tnJw9VMA.cspx 500+ New Jobs Chesapeake Energy Louisville, Ohio 100 New Jobs Kelchner Dayton, Ohio CHK correspondence with company 45 New Jobs CESO Dayton, Ohio CHK correspondence with company 300 New Jobs Halliburton Zanesville, Ohio =1&nclick_check=1 145 New Jobs 55 Jobs Saved Tremcar Dover, Ohio New Jobs Schlumberger New Philadelphia, Ohio

30 Wages for Ohio Shale-Related Industries Petrochemical manufacturing Iron and Steel Mills Oil and gas pipeline construction Pipeline transportation Engineering services Drilling oil and gas wells Iron, steel, pipe and tube Environmental consulting Oil and gas field machinery Site prepartion contractors Water supply and irrigation systems Geophysical surveying and mapping General frieght trucking $96,493 $80,123 $78,219 $77,448 $72,893 $65,579 $65,511 $61,192 $60,423 $54,623 $52,340 $51,313 $40,863 Source: Ohio Department of Job and Family Services, Ohio Shale, January 2015

31 Shale development equals more government revenue U.S. $74 billion in 2012 $126 billion by 2020 $1.6 trillion Ohio state and local $911 million in 2012 $4.6 billion by 2020 $58 billion Source: IHS Global Insight, August 2013

32 Power and Politics

33 Nine US facilities have been approved to export LNG, over 20 are awaiting approval and there are more than 60 competing sites planned or under construction in foreign nations Source: API LNG Export Facility Map

34 Why export natural gas? 30,100 new jobs $5.1 billion in state income Source: ICF International

35 Why export crude oil? Crude oil exports yield economic benefit across all 50 states Save consumers up to $5.8 billion a year in lower fuel costs Add 300,000 jobs to U.S. economy in 2020 Reduce America s trade deficit by $22 billion in 2020 For Ohio could add 16,000 jobs and $2.7 billon in state income by 2020 Source: ICF International and EnSys Energy,

36 87% of federal offshore acreage is off-limits to development

37 Development of Canadian oil sands would benefit the U.S. economy

38 Filling America s tank Within 10 years Canada and U.S. can provide all our liquid fuel needs Sources of liquid fuel supply in % 10% 13% 53% Oil from Rest of World Biofuels Oil from Canada U.S. Oil Production 10% 18% 72% EIA Forecast Sources: EIA; Wood Mackenzie Potential

39 Taxes paid by oil and natural gas companies are a significant source of public revenue Income Tax Expenses as a Share of Net Income Before Income Taxes (2014) 39.5% 27.0% Oil and Natural Gas Companies S&P Industrials Excluding Oil and Natural Gas Companies Source: Compustat North America Database (April 2015 update).

40 Source: Wood Mackenzie, U.S. Supply Forecasts and Potential Jobs and Economic Impacts, September 7, 2011.

41 Voters voice strong support for increased domestic oil and natural gas development 90% Harris Poll Results on Increased U.S. Oil and Natural Gas Development 86% 86% 85% 83% 72% 70% 65% Lead to more jobs Help strengthen energy security Help stimulate economy Help lower energy costs Support O&NG development Support Keystone XL pipeline Support offshore development Increasing energy taxes may hurt consumers Source: Harris Interactive telephone poll, November 5, 2014

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