Sunday, January 20, 2013

Tight oil & USA's new oil renaissance

NPR had a great piece about the impact of tight oil discoveries (e.g. the Bakken formation) and just how much it has changed the energy landscape in the USA. In short:


(credit to NASA/NPR, link above).

The new gold rush has literally lit up the countryside so much that it can be seen from space. What drove such a boom in oil production that the International Energy Agency is now predicting that US production will surpass Saudi Ariabia's by 2017?

In a word, fracking. The same new technology that was all the news in natural gas has been applied (along with horizontal drilling) now to oil-bearing rocks that were previously inaccessible (such as the Bakken Formation).

This resulted in the out-performance of US (midcontinent) refiners, which have cheap access to such crude oil and can sell product at wider margins in the world market:


Yet, wti crude still remains around the 95$ level - a discount to the european/world brent oil prices, but still higher than say in 2006. But, not being an expert on this, does crude oil run the risk of becoming the next natural gas?

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