After decades of rising demand and declining supply, theU.S.is consuming less and producing more, thereby lowering its reliance on foreign sources of crude oil. Other areas of significant production growth includeSouth America,RussiaandCanada.
Increased oil production in the U.S.and other non-OPEC countries, which more than offsets the increases in global demand, is keeping pressure on OPEC to limit crude oil output. Increased supply typically creates lower oil prices, but today’s new supply is being outweighed by anticipated supply interruption fromIranand other smaller sources including:Syria,Yemen, theSudans, and theNorth Sea. These supply worries are further compounded by continuing fairly low levels of OPEC spare capacity, yielding oil prices of around $120/bbl.
The advent of increased domestic supply is certainly positive for theUSeconomy and energy security. Importing less oil and gas creates a more positive trade balance for theUS, and domestic production stimulates job growth, local business revenues and tax receipts, along with other positive economic impacts.
While theUSbenchmark crude WTI has become disconnected from globally-traded crude oil, global crude prices are still high as a result of geopolitical supply uncertainty. Oil demand in theUSand other developed economies in 2012 is expected to continue to decline, but on a global basis will rise by a modest 0.9%, led by the emerging economies.
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