Alex Mills
By Alex Mills
Crude production surpassed another milestone last week, reaching almost 9 million barrels per day (bpd), according to the Energy Information Administration, the numbers section of the Department of Energy.
The EIA’s monthly data shows production at 8.97 million bpd, the highest since 1986.
In Texas, crude oil production surpassed 3 million bpd, and the Texas Petro Index set another record last month.
US crude production continues to grow, U.S. inventories climbed by 2.06 million barrels to 379.7 million barrels last week, according to the EIA report.
Crude imports dropped 5% last week to 7.1 million bpd, down 4.8% from a year ago.
The surge in production has helped push oil prices down 20% this year.
Gasoline
There is a direct impact on gasoline prices when the price of crude oil goes up or down, EIA stated.
“A general guideline for how crude oil prices affect gasoline is that a $1-per-barrel change in the price of crude oil translates into a change of about 2.4 cents per gallon of gasoline,” EIA stated.
U.S. average gasoline prices declined 6 cents last week to $2.993 per gallon, EIA reported. Cheapest region was the Gulf Coast with an average-per-gallon cost of $2.769. Highest prices were on the West Coast at $3.237.
Texas Petro Index
Record permitting activity, record employment, and more than 900 rigs drilling on-location continue to propel the Texas Petro Index (TPI) to a record 312.3, up from 310.7 last month and a 6 percent increase over the same period in 2013.
However, the record-setting indicators were overshadowed by declining crude oil prices, which fell to about $78 per barrel at the end of October.
“Clearly the decline of oil prices suggests the current expansion of oil and gas drilling and development activity that began in January 2010 might be about to come to an end,” said Karr Ingham, the economist who created the TPI and maintains it monthly. “Any slowdown–and the depth and length of that slowdown-will depend entirely upon how far prices fall and how long they remain relatively low.
“But remember,” Ingham added, “the oil-price decline is neither accidental nor random. It is the result of the spectacular crude oil production increases achieved by operators in Texas and all across North America in recent years, with assistance from sluggish economic conditions keeping a lid on energy-demand growth.
“This is how markets are supposed to work: high prices stimulate additional production, which in turn stabilizes prices or pushes them lower. That is exactly what is happening now.”
Ingham said the benefit of lower oil prices to U.S. consumers, in the form of lower gasoline prices, was just one direct, beneficial outcome. “More of our energy is being produced here at home; crude oil imports have been cut well more than in half and more of what we do import comes from Canada. In fact, this, in part, is what energy independence looks like in the U.S., and isn’t this the outcome we have wanted as consumers?”
Estimated Texas natural gas output was more than 680.2 billion cubic feet, a meager year-over-year monthly increase of about 0.3 percent. With natural gas prices in September averaging 3.92/Mcf, the value of Texas-produced gas increased 13.3 percent to more than $2.66 billion.
The Baker Hughes count of active drilling rigs in Texas averaged 902, increasing 7.8 percent from 837 active rigs in September 2013.
The number of Texans on oil and gas industry payrolls averaged a record 309,400, according to statistical methods based upon Texas Workforce Commission estimates, about 9 percent more than in September 2013. Upstream oil and gas industry employment in Texas has increased steadily since falling to a nadir of 179,200 in October 2009. During the previous growth cycle, industry employment peaked at 223,200 in November 2008.
Alex Mills is President of the Texas Alliance of Energy Producers. The opinions expressed are solely of the author.
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