The “Golden Age” of Oil is Set to Hit the American Economy
Bill Poulos is an experienced investor, financial educator, and author. Poulos is the president and co-founder of Profits Run, Inc. He has written many books using his financial expertise, like Bill Poulos’s Simple Options Trading For Beginners: How to trade options from A to Z explained in plain English. Recently, Poulos and Profits Run, Inc. launched a website dedicated to successful African Americans. Bill stays abreast of current hot topics and trends in the market. Poulos earned his MBA in finance from the University of Michigan. He lives in Michigan with his wife, Karen.
America is in a league of their own when it comes to Oil Production, with staggering numbers to back that statement.
America set records this week for the gas and oil markets by reaching roughly 11.6 million barrels produced every day. A personal best, that number is greater than Saudi Arabia’s 10.7 Million or Russia’s 11.4 Million.
When you look at the numbers just one year ago, they are even more impressive. Last year we were at about 9.5 Million barrels per day. That jump reflects an 18% increase in productivity in fewer than 365 days.
Even better, based on government estimates, that number could still go higher. Analysts estimate a production rate of 12.1 Million barrels per day in 2019.
“US crude oil production was recorded at a new record high, and the largest in the world by far, moving ahead of Russia and closer to the level Saudi Arabia might be able to reach in another six months,” said an analyst for Citigroup, Eric Lee.
In fact, Oil Production has reached such great heights that we’ve gone from dependence on foreign oil to exporting it to other countries — something that was completely out of the realm of possibility five years ago. Brazil, Canada, Mexico, and China are now the largest purchasers of U.S. made oil.
The U.S. is doing great, and People like OPEC and Russia have Noticed
Right now, there’s a geopolitical power struggle at play, with the forerunners being Saudi Arabia
One of the most fascinating geopolitical battles being played out right now is between Saudi Arabia — the unofficial head of OPEC, and key ally to America versus OPEC’s smaller states who are pushing for Saudi Arabia to decrease supply to increase prices.
The biggest thing standing in the way of that is President Trump who is working with Saudi Arabia, encouraging them to keep production while simultaneously renewing sanctions on Iran. Aggravating the problem even further is the bilateral agreement that Saudi Arabia and Russia agreed to earlier in the year. Allegedly, both countries agreed to increase production of oil to minimize the effect of the Iranian sanctions.
An OPEC meeting is set to occur in Abu Dhabi this weekend, with all the drama of a Thanksgiving dinner expected to occur. Several OPEC members are curious as to the reason for the bilateral concord between the Saudis and Russians with a follow-up question as to why the price of oil has dropped as drastically and as quickly as it has.
“Some in OPEC are blaming Russia and Saudi Arabia for a $15 fall in the oil price and are calling on them to cut production by 1 million barrels a day immediately,” said John Kilduff, a partner belonging to Again Capital. “There’s going to be some fireworks at this meeting. The price fall over the last four weeks has been so swift and dramatic that it’s definitely getting their attention.”
Should OPEC Concede to Production Cut-Backs, China will Bear the Brunt of the Pain, Not America
A long history of battling over U.S. oil interest in the middle east has taught the American people that it’s far better to make your own than target someone else’s supply. And we can’t deny that Trump has been more proactive on that front than any of his predecessors, with his work to reduce regulations that would prevent expanded areas for drilling.
With as little as half the oil imports compared to the numbers recorded in 2006 America is saving loads of money on import costs while simultaneously boosting its leverage around the world. Given the current influence America has gained from current rates of production, they would be able to impart sanctions on Russia, Iran, and even Saudi Arabia should they need to.
While it’s all sunshine and rainbows for America, China is just struggling to find a silver lining in the midst of their overcast situation. They are now the world’s biggest importer of oil. It is something the U.S. can certainly sympathize with, having been in this position before. What’s worse, China is also coming close to surpassing Japan as the biggest natural gas importer.
Things can’t be easy for Xi Jinping, China’s president, who is already struggling with the potentially imminent financial crisis as well as America’s new dominance in the energy industry, something China used to be known for. This trend can only lead to greater American leverage over trade, bringing Xi to the table for talks sooner rather than later. Such a talk would lift the markets and possibly bring this current trade war to an end.