The U.S. Energy Information Administration (EIA) reduced its forecast for domestic oil production growth in 2024 by 120,000 barrels per day to 170,000 barrels per day, as oil production fell in January because of shut-ins related to cold weather, particularly in oil producing North Dakota. U.S. oil production reached an all-time high in December of more than 13.3 million barrels per day, but fell to 12.6 million barrels per day in January. EIA expects oil production to almost reach December’s high in February and then decrease slightly through the middle of 2024, but reach an annual production of 13.1 million barrels per day, higher than the 12.93 barrels per day reached in 2023. The agency does not expect oil production to exceed the December 2023 record until February 2025. In 2025, oil production is expected to increase by 390,000 barrels per day to a new record high of 13.49 million barrels per day.
EIA expects oil prices to average $82 per barrel in 2024—the same as in 2023—and then fall to $79 a barrel in 2025. The Brent oil spot price increased in January, averaging $80 per barrel because of heightened uncertainty about global oil shipments as attacks to vessels in the Red Sea intensified. EIA expects oil prices will rise into the mid-$80 per barrel range in the coming months, and then subside in the second quarter as global oil inventories generally increase through the rest of the forecast. The Red Sea attacks have increased both transit times and shipping costs for oil, limiting the flexibility of the oil market to adjust to any future supply disruptions. The attacks also add a risk premium to prices due to the potential that oil production in the Middle East could be shut in during the forecast period, although no oil production has been lost so far. The agency cautions, however, that ongoing risks of supply disruptions in the Middle East create the potential for oil prices to be higher than the forecast.
The impact of the Red Sea attacks on oil prices has been limited because of prolonged global oil inventory accumulation during 2022 and 2023 and the lack of disruptions to oil production. EIA estimates that global oil inventories increased by 0.8 million barrels per day on average from October 2023, the month before the Red Sea attacks began, through January 2024 and by an average of 0.7 million barrels per day for all of 2023.
OPEC+ production cuts are expected to lead to global oil inventory withdrawals during February and March, resulting in an average draw of 0.8 million barrels per day in the first quarter of 2024 that will put upward pressure on oil prices in the coming months. After a period of relatively balanced markets during the rest of 2024, the market is expected to gradually return to moderate inventory builds in 2025 as slowing growth in oil demand is again outpaced by increasing oil production growth. EIA expects global oil inventories to continue to increase, but by a slower rate.
U.S. Oil Production Is Strong Despite Biden’s Policies
Most of President Biden’s anti-oil and gas policies do not have a short-term effect as they impact oil drilling and leasing, mostly on federal lands and waters, where it takes years before actual oil production takes place. That, of course, means that voters will not see the impact of his onerous policies until he is no longer in office. The Institute for Energy Research has found 175 ways in which President Biden and his Democrat friends in Congress have limited future oil and gas production — from having far fewer lease auctions in the 5-year mandated offshore lease plan than any previous administration — to designating more areas of public lands off limits to oil and gas drilling. This matters because the federal government owns 2.46 billion acres of mineral estate in the United States, larger than the surface area of the country.
Most recently, President Biden hit the state of Alaska that relies on oil revenues hard by canceling oil and gas leases held by the state in the 1002 area of Arctic National Wildlife Refuge (ANWR) that was specifically set aside by Congress for oil and gas leasing and Congressionally-mandated lease sales. His administration also proposed new regulations to make it more difficult to produce oil and gas in the National Petroleum Reserve-Alaska by withdrawing almost half of the prospective area. On Biden’s first day in office, he restricted domestic oil production in ANWR by issuing a moratorium on all oil and natural gas leasing activities there.
Alaska is rich in oil and gas resources and was instrumental in providing oil to the lower 48 states in the 1970s when the Trans Alaska Pipeline System was built. It was important for the United States to have a domestic source of oil to offset the high rise in foreign oil and the Alaska Pipeline fulfilled that need. But the pipeline needs more oil to remain operational as it is down to one-quarter of its operational flow rates. Biden is impeding that progress which in turn threatens the pipeline’s viability.
President Biden is following through with what the Obama administration started despite events proving President Obama wrong when he had said that the United States could not drill its way out of oil dependency. Obama was proved very wrong due to the ingenuity of the U.S. oil and gas industry that used hydraulic fracturing and directional drilling to reach oil that was otherwise unattainable. Much of the increased production has occurred in the Permian Basin of Texas and New Mexico, where horizontal drilling and hydraulic fracturing have unlocked huge new resources which led to U.S. energy independence in 2019 and made the United States the number one oil and gas producer in the world. The results of President Trump’s U.S. Energy Dominance Program are still alive as the EIA forecast above shows but could be usurped in the future if Biden’s onerous rules and regulations affecting the industry are not overturned.
Biden is expecting renewables to be the future of energy in the United States. But there are numerous pitfalls with that approach. Despite current folklore, those technologies do not provide cheap energy. They are at the whim of weather—the sun and the wind. When the sun does not shine and the wind does not blow, they produce no energy and must be backed-up by traditional energy sources or very expensive batteries that store excess energy to be used later. Even those batteries have their pitfalls as they can only hold so much energy.
President Biden’s goal of turning all sectors 100 percent electric will more than double current electric demand. Since wind and solar so far have not been able to replace the electricity that coal and natural gas generate to meet U.S. needs after decades of subsidies, it is doubtful that those technologies can also meet all the new demand that the Biden administration is expecting to reach its climate goals.
Americans only need to look at the net zero carbon policies and outcomes of Europe to see the havoc that those policies have produced. Farmers are revolting, industries have moved abroad, imports from China are competing with domestic industries, and economies are tumbling.
Some Differ on When Oil Production Will Falter
Some believe that the oil market will face a supply shortage by the end of 2025 because the world is not replacing oil reserves fast enough. They say that about 97 percent of the oil produced today was discovered in the 20th century and the world has replaced less than 50 percent of the oil produced over the last decade. Oil reserves in the United States, however, are double what they were in 2009 despite increasing amounts of U.S. oil production over that time. World oil reserves at the end of 2020 were 33 percent higher than they were at the end of 2000. Oil reserves in Canada, Venezuela and the Middle East remain extremely high.
Conclusion
Biden’s anti-oil and gas policies are not having much of an effect on oil and gas production so far because those policies will mostly affect production years in the future when he will no longer be President of the United States. EIA’s Short-Term Energy Outlook expects increased oil production in both 2024 and 2025 as the ingenuity of U.S. oil producers continues increasing production through improved technology and efficiency. But Biden’s policies will have a disastrous effect in the longer term when new areas of resources need to be developed on federal lands for production to continue to meet demand. It is on these lands the future depends, as most private landowners welcome the jobs and revenue energy production entails, and from which the vast majority of oil and gas is currently produced domestically.
