Is this the end of the beginning or the beginning of the end for the U.S. oil and gas boom?
After watching the U.S. drilling rig count plummet last week by 98 units, it’s nearly impossible not to be bullish on oil prices at this point.
Over the last four months alone, the rig count has fallen by 562 units.
Anyone who doesn’t believe production growth will be stymied in the latter half of 2015 is in for a surprise.
Still, the ominous drop in the number of rigs drilling for oil and natural gas isn’t the only wake-up call we’ve had lately.
Middle East Shackles Remain
Recently, the CEO of Total came under fire after suggesting that the U.S. will never unshackle itself from its addiction to oil from the Middle East.
You know what? He’s actually right.
Only a fool would think the U.S. could drill itself to complete and utter oil independence. That may sound overly harsh considering that the topic is a favorite in the mainstream media, but it’s not — it’s realistic.
For the U.S. to truly become oil independent, it means more than just eliminating its thirst for OPEC oil. Last November, we imported nearly 7.3 million barrels every day!
OPEC only supplied 36% of that amount.
Remember, complete oil independence would mean cutting all oil imports.
In other words, domestic oil production within the United States would have to grow to more than 16 million barrels per day, and that’s assuming our consumptions remain relatively flat. (Fortunately, they have, according to EIA projections.)
Think about that for a minute…
It took arguably the largest oil boom in decades for the U.S. to increase its daily output by 71% between 2009 and today. Now we’re expecting our tight oil resources to help us boost it by another 75%?
At what point do we see this pipe dream for what it really is?
If you want proof that oil prices have nowhere to go but higher, just remember a few simple facts…
Six out of every 10 barrels of oil extracted within the United States come from one of three regions.
Moreover, this new oil supply coming from our tight and shale oil plays isn’t cheap to produce. Truth is, the price tag associated with this boom has almost tripled in the last 10 years:
Click Chart to Enlarge
There is, however, one thing we know for certain: Cheap oil prices have created an incredible buying opportunity for individual investors like us.
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Wealth-Building Opportunities
Forget the doom and gloom and close your eyes for just a moment. Think about what you were doing six years ago.
Back in February of 2009, when crude prices had bottomed to under $40 per barrel, things seemed just as bleak as today.
Perhaps the only comfort we can fall back on when oil prices crash like this is that the best cure for low oil prices is low oil prices… or is it?
I think it’s safe to say that nobody in the United States wants to go back to 2008, when half of our oil imports came from OPEC.
Granted, we may not need a sudden and inexplicable surge in oil prices. We won’t see crude top $147 per barrel anytime soon.
But operators in those three regions I mentioned above don’t need oil prices to be that high. In fact, companies drilling in the sweet spots of North Dakota will be perfectly content with oil prices under $100 per barrel.
Which means, of course, that OPEC’s troubles have only just started.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.
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