Imports, Restrictions Clutter Forecasts for Oil Industry
There are sound forecasts that natural gas supply constraints _ if not a shortage _ are looming and gas prices are rising. But, what's going on with oil?
Of course, there hasn't been talk of an oil shortage for 20 years, and none now. But, the oil picture is cluttered with imports, you see. As long as we have oil imports, a dialogue about shortage seems rather synthetic to most people. Besides, the Middle East could supply the world with oil for many lifetimes.
Yes, there are natural gas imports into the United States, too, and they are expected to rise significantly in the coming years. But the dilemma in the natural gas market will not be confined to the U.S., either. It will be a North American quandary: Canada is limited to the volume of gas it can ship to the U.S., although there are expansion projects under way; and Mexico is eager to vastly increase its use of environmentally benign natural gas, with a huge chunk of the new supply anticipated to come from the U.S. Also remember that Canada's drilling rig count has been as depressed as the United States'.
Natural gas doesn't ship across the seas as well as oil, you see; liquefied natural gas is brought in by tanker, but that is a much more expensive gas when the processing costs are considered. Oil is easily transported across the oceans, and safely for the most part.
So, just what is going on with oil?
It used to be that U.S. politicians, and the general public, were outraged at 32 percent to 38 percent oil import levels of the late 1970s and mid-1980s. It's been at 50 percent in the last two years _ during which time we went to war in the Middle East, partially to secure oil supplies _ and is now between 45 percent and 50 percent. But, there's a conspicuous calmness and quiet among Americans regarding oil imports.
Of course, gasoline lines would quickly reverse the silence.
There is credence to accepting that we cannot do away with oil imports all together. For many years it has been widely known that the United States is no longer the oil giant it once was. U.S. oil production peaked in 1970 and has been falling ever since.
But this year U.S. oil production is running at a 31-year low, and new drilling is at a 21-year low.
Domestic oil production for the first half of 1992 fell 3.3 percent from the first half of 1991 to an average 7.2 million barrels a day _ the lowest since the first half of 1961, according to the American Petroleum Institute.
It was down by about 250,000 barrels a day from the daily average of 7.5 million barrels in the first half of last year.
At the same time, U.S. deliveries of petroleum products _ a key measure of demand _ rose 1.6 percent in the first half of 1992 from the first half of 1991, reported the trade group for major oil companies and large independents. Demand averaged 16.7 million barrels a day in the first half of the year, compared with a daily average of 16.4 million barrels in the same six months of last year. …