The Industry: Oil & Gas
With the world focused on social and political upheaval in many oil-producing nations, finding new sources of oil and gas from regions that can help provide a more reliable energy supply has become a priority. We consider there are immediate and unprecedented opportunities for the exploitation of oil and gas in the United States and Canada.
U.S. Petroleum
Consumption. Total U.S. petroleum and other liquids consumption is projected to decline by 610,000 bbl/d, or about 3 percent, in 2008 based on prospects for a weaker economy and high crude oil and product prices continuing into 2009 (U.S. Petroleum Products Consumption Growth). Preliminary July and August 2008 weekly survey data indicate that year-over-year declines in total consumption, which began in August 2007, have narrowed since earlier this year. During the first 6 months of 2008, total petroleum consumption fell by an average of 930,000 bbl/d compared with consumption during the same period in 2007. During July and August, the year-over-year declines averaged 660,000 bbl/d. For the rest of the year (September though December), the year-to-year decline in consumption is projected to narrow to an average of about 130,000 bbl/d.
Supply. In 2008, total domestic crude oil output is projected to average 5.13 million bbl/d, up slightly from the 2007 average of 5.06 million bbl/d (U.S. Crude Oil Production). Production growth in the lower-48 region is expected to more than offset declines in Alaskan output. This projection includes an assumption of hurricane-induced outages of about 14.5 million barrels for the offshore region in 2008 (see Hurricane Outlook). In 2009, total crude oil production is projected to increase to 5.42 million bbl/d, mostly because of the Thunder Horse and Tahiti platforms coming on-stream in late 2008 and 2009, respectively. Fuel ethanol production is projected to increase from an annual average of 430,000 bbl/d in 2007 to 590,000 bbl/d in 2008 and to 660,000 bbl/d in 2009. Because of declining petroleum consumption and growing ethanol production, total net imports of petroleum are expected to fall by 740,000 bbl/d in 2008 and by a further 460,000 bbl/d in 2009.
Prices. WTI crude oil prices, which averaged $72 per barrel in 2007 (Crude Oil Prices), are projected to average $116 per barrel in 2008 and $126 per barrel in 2009. Regular-grade motor gasoline retail prices, which averaged $2.81 per gallon in 2007, are projected to rise to an average of $3.61 per gallon this year and $3.88 per gallon in 2009. This forecast projects continuing weak gasoline margins because of the decline in gasoline consumption and growth in ethanol use. Diesel fuel retail prices in 2008 are projected to average $4.09 per gallon, up from $2.88 per gallon in 2007, and increase to an average of $4.26 per gallon in 2009. Diesel prices reflect continuing strength in demand, particularly in emerging global markets, which has significantly increased the margins between diesel prices and crude oil costs from their 2007 level.
Natural Gas
Consumption. Total natural gas consumption is expected to increase by 2.7 percent in 2008 and by 2.2 percent in 2009 (Total U.S. Natural Gas Consumption Growth). Consumption growth is expected in all sectors during the forecast period, led by the residential and commercial sectors in 2008 and electric power in 2009. Despite higher prices through the first half of 2008, natural gas consumption in the industrial sector increased by 3.7 percent compared with the corresponding period in 2007. Consumption in the industrial sector is expected to increase by 1.6 percent in 2008 and by 1.4 percent in 2009. However, fragile domestic economic conditions add significant uncertainty to the forecast.
Production and Imports. Total U.S. marketed natural gas production is expected to increase by 7.8 percent in 2008 and by 3.8 percent in 2009. Strong year-over-year production growth has been led by the development of onshore fields, particularly in Texas and Wyoming, where production increased by 16 and 12 percent, respectively, during the first 6 months of 2008 relative to year-ago levels. The increase in lower-48 production excluding the Federal Gulf of Mexico (GOM) has more than offset the year-over-year decline of almost 3 percent during the first half of 2008 in Federal GOM production. Federal GOM production in 2008 is projected to be slightly lower than in 2007, followed by a 4.3 percent increase in 2009. Production in the lower-48 non-Gulf region is expected to increase by 9.5 percent in 2008 and by 3.8 percent in 2009, though the projection of supply growth next year remains subject to expectations about natural gas prices.