U.S. Is Overtaking Russia As The World’s Largest Energy Producer
The U.S. is overtaking Russia as the world’s largest producer of oil and natural gas, a startling shift that is reshaping markets and eroding the clout of traditional energy-rich nations.
U.S. energy output has been surging in recent years, a comeback fueled by shale-rock formations of oil and natural gas that was unimaginable a decade ago. A Wall Street Journal analysis of global data shows that the U.S. is on track to pass Russia as the world’s largest producer of oil and gas combined this year—if it hasn’t already.
The U.S. ascendance comes as Russia has struggled to maintain its energy output and has yet to embrace technologies such as hydraulic fracturing that have boosted American reserves.
“This is a remarkable turn of events,” said Adam Sieminski, head of the U.S. Energy Information Administration. “This is a new era of thinking about market conditions, and opportunities created by these conditions, that you wouldn’t in a million years have dreamed about.”
The U.S. produced the equivalent of about 22 million barrels a day of oil, natural gas and related fuels in July, according to figures from the EIA and the International Energy Agency. Neither agency has data for Russia’s gas output this year, but Moscow’s forecast for 2013 oil-and-gas production works out to about 21.8 million barrels a day.
U.S. imports of natural gas and crude oil have fallen 32% and 15%, respectively, in the past five years, narrowing the U.S. trade deficit. And since the U.S. is such a big consumer of energy, the shift to producing more of its own oil and gas has left substantial fuel supplies available for other buyers. Nations that rely on peddling petroleum for their economic strength and political clout face dwindling market power as a result. Oil prices so far remain high, however, closing Wednesday at $104.10 a barrel, up 18% from a year ago.
Many analyses of energy markets look only at crude oil. But Russia and the U.S. also are major players in natural-gas markets, where they far outproduce countries such as Saudi Arabia, the world’s largest oil producer.
The U.S. last year tapped more natural gas than Russia for the first time since 1982, according to data from the International Energy Agency. Russia’s exports have been crimped by rising competition and the economic slump in Europe. Russia forecasts that its gas production will increase slightly in coming years, but its forecast for this year is below current U.S. production.
The U.S. is also catching up in the race to pump crude. Russia produced an average of 10.8 million barrels of oil and related fuel a day in the first half of this year. That was about 900,000 barrels a day more than the U.S.—but down from a gap of three million barrels a day a few years ago, according to the IEA.
The amount of crude from two of the hottest plays in the U.S.—the Bakken oil field in North Dakota and the Eagle Ford shale formation in South Texas—continues to rise rapidly, while Russian output has increased modestly over the past three years. The Russian government predicts oil output will remain flat through 2016, while natural gas ticks up 3%. The shift has raised concerns in Moscow that U.S. crude supplies will crowd out Russia’s oil exports.
“Russia looks like the main loser in the global market,” said Tatiana Mitrova, of the Russian Academy of Sciences’ Energy Research Institute. More than 40% of Russia’s budget comes from oil-and-gas related duties and taxes, she said.