Why more shale oil won't help US gasoline prices.
The extra barrels we make will go overseas, not to US refineries. And there are big questions about how many more there will be.
This first post is a boost for a gentleman who has been doing his best to provide data, not intuitions, guesses, or “informed judgements” about the outlook for US tight oil. He’s been in the business of drilling and producing wells for decades, both shale and conventional, and has an amazing archive of photos and industry history to share. He deserves a wider audience and a lot of respect. Especially because he’s not asking for more money, lower taxes, or the demise of the renewable industry.
The crude we produce in the US is not the kind of crude that a lot of our larger refineries are configured to run. Decades ago, when the world seemed to be running low on light crude, many large US refineries were rebuilt to use cheaper crude that contained sulfur, which creates sulfur dioxide, aka acid rain, when it’s burned, and doesn’t make as much gasoline per barrel as the crude that we were running low on. The sulfur dioxide problem was ultimately fixed after 30 years of investment and regulatory pressure, and now our transport fuels have very low sulfur. When shale oil production began to grow in the “10s”, US refiners made changes to their facilities to use as much of it as possible, but currently our production exceeds their capacity to use it, and the surplus is exported. It’s why we still need crude oil from Canada. So, even if drilling does ramp up, and even if production does grow this year, the extra barrels will go overseas, and we’ll still need to import crude from other countries to make gasoline, and diesel, which is in very short supply.
As for the outlook for future production growth, Mike Shellman’s latest post makes the point very well. Please take a look at What's Plan B? on his OilyStuffBlog site.
Oil Literacy link doesn't work.