The U.S. Needs to Capitalize on Its Oil Bonanza

Bank of America noted in a recent report that the U.S. has surpassed Saudi Arabia as the world's biggest oil producer.

Jul 16, 2014 at 2:19PM

In a recent report, Bank of America said that the U.S. has already surpassed Saudi Arabia as the world's biggest oil producer. While some industry watchers say that Bank of America's estimates are generous, even by conservative estimates, the U.S. is inching closer to the top spot. Despite the abundant oil production, however, the U.S. remains reluctant to export.

Surpassing Saudi Arabia
In a report last year, the Paris-based International Energy Agency (IEA) had said that the U.S. will surpass Saudi Arabia as the world's biggest oil producer by 2016. Last month, the IEA said that the U.S. is already the biggest producer of oil and natural gas liquids. Analysts at Bank of America also noted in a recent report that the U.S. has surpassed Saudi Arabia as the world's biggest oil producer.

Francisco Blanch, who heads the bank's commodities research division in New York, said in the report that the American shale revolution has had a transformational effect on the U.S. and global economies in recent years.

Bank of America noted in the report that Saudi oil production stood at 10 million barrels per day. According to the analysts, in the first quarter of 2014, U.S. oil and natural gas liquids production exceeded 11 million barrels per day. However, some industry analysts say that Bank of America is far too generous in its estimates.

The Energy Information Administration (EIA) said in a recent report that the U.S. produced around 8.1 million barrels per day in the first quarter. But even by conservative estimates, the U.S. is now inching closer to Saudi Arabia. More importantly, production in the U.S. is surging.

Oil major BP (NYSE:BP) noted in a recent report that global oil output rose slightly in 2013 due to the largest increase in non-OPEC countries since 2002 and the main contributor to this growth was the U.S. According to BP, U.S. oil production exceeded 10 million barrels per day in 2013, reaching the highest level since 1986. Production rose by more than 1.1 million barrels per day last year, which was the second straight year of above 1 million barrels per day of supply growth. And production growth has continued in 2014, according to BP.

If the U.S. has not surpassed Saudi Arabia, at the current pace of production growth it will do so by 2015. Indeed, the time has come for the U.S. to capitalize fully on its oil bonanza.

Lifting the export ban
The over four-decade long export ban in the U.S. remains in place even as oil production continues to surge. The ban was imposed after the Arab oil embargo caused an oil price shock. However, back then, U.S. production was declining.

In the present environment, keeping the ban in place will do more harm than good. The export ban has already caused a supply glut, which has led to lower WTI prices compared to the global benchmark. Most refineries on the Gulf Coast are not equipped to process the light, sweet crude produced in the U.S. This has led to an oil surplus. However, producers cannot export this surplus. Oil producers such as Continental Resources (NYSE:CLR) have been urging lawmakers to lift the ban and allow exports. If they are allowed, WTI prices would move closer to the global benchmark, enabling producers to fully take advantage of the U.S. oil boom.

The argument against lifting the ban is that more expensive WTI would mean U.S. consumers will have to pay more at the pump. If, however, the ban remains in place and WTI prices continue to trade at a discount to the global benchmark, there will be little incentive for producers to boost production. That would mean the U.S. will have to import more foreign oil at higher prices, which would ultimately push gasoline price higher. 

The Obama administration has looking at the ban and recently, it took a small step in the right direction by allowing Pioneer Natural Resources and Enterprise Products Partners to export very light oil with minimal processing. However, more needs to be done, and with the U.S. now possibly the biggest oil producer, it is the right time to lift the ban.

America's energy boom is just getting started
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven't heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America's greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, "The IRS Is Daring You to Make This Investment Now!," and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.


Varun Chandan Arora has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information