Please ensure Javascript is enabled for purposes of website accessibility

Is the US Producing Too Much Oil?

By Motley Fool Staff - Mar 28, 2017 at 10:41AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

U.S. oil producers across the board are ramping up production in 2017. Here's why, and how it'll affect the industry.

OPEC's production cut had many investors excited for a recovery in oil prices, but the U.S. seems determined to fill in that supply gap.

In this clip from Industry Focus: Energy, Fool energy analysts Sean O'Reilly and Taylor Muckerman discuss how much production is set to increase in 2017, what it means for the oil industry in the next few years, and why so many U.S. companies are making a less-than-opportune decision.

A full transcript follows the video.

This podcast was recorded on March 23, 2017.

Sean O'Reilly: Couple months ago, OPEC cut production, and everybody was like, "Oh, it's $50, it's coming back, maybe $70 this year." You, very wisely, have been a little less euphoric, enthusiastic.

Taylor Muckerman: Yeah. I feel like we've talked about what's happening months ago, before it actually happened.

O'Reilly: But we have to do it again.

Muckerman: Yeah. OPEC cut, U.S. said, "We're not going to, we're going to ramp it up."

O'Reilly: Fuel Fix -- you sent me a very interesting blog, I was very happy to read this, because it gives some hard numbers for what we're talking about. The headline reads, "Is The Boom Back? Drillers to Spend $25 Billion More in 2017," by David Hunn, it ran on March 16th. That's a lot of money. And also, when I read this, it popped into my mind that Exxon[Mobil] (XOM 2.23%) made that $6.5 billion purchase from the Bass family down there in Texas, of shale property. So now, you have the biggest domestic energy company out there getting in on the game. It's like, "Ugh, we're going to do this again?"

Muckerman: Reminds me of their XTO purchase way back when.

O'Reilly: Oh, gosh, what year would that have been?

Muckerman: That was 2010 or 2011.

O'Reilly: How big was it? Why did you say that reminded you of this?

Muckerman: Because they were trying to get into the shale gas game when prices were sky high, then they fell off. At least now, maybe they're buying at low prices. Could be. Maybe $50 is the new $100. The U.S., like you said, spending is up globally throughout the rest of this year, predominantly in the U.S.

O'Reilly: They're getting so efficient. Yeah, so, what else did you take from this? What did U.S. production peak out at? 10.3 million barrels?

Muckerman: Something like that, we dropped below 9 [million] recently. But now, they're expected to boost another 1 million barrels a day over the next year or two.

O'Reilly: Guys, stop it. Guys.

Muckerman: [laughs] Yeah. They keep getting more efficient.

O'Reilly: Crowe used to talk about how, "These guys only know one thing, these wildcatters, and that's getting out there and finding some oil."

Muckerman: Yeah. If you read the history of some of these guys, The Frackers is a book by Greg Zuckerman? I think?

O'Reilly: I can Amazon it.

Muckerman: I know his last name is Zuckerman, because it rhymes so nicely with my last name, Muckerman. Great book, yeah, the history of Harold Hamm and Aubrey McClendon and a few other infamous wildcatters.

O'Reilly: This is available on Amazon.com and fine bookstores everywhere. It is Gregory Zuckerman.

Muckerman: Gregory, good. My memory serves correctly.

O'Reilly: The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters. Yee-haw.

Muckerman: That book goes back, I think, several decades, and nothing has changed. Oil has just gotten cheaper to produce via fracking. So, if you really want to learn about this, what's going on in the United States, in my mind, that's the book to read.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Exxon Mobil Corporation Stock Quote
Exxon Mobil Corporation
XOM
$87.55 (2.23%) $1.91

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.