The Biggest Oil Boom You've Never Heard About
Tell me the three largest oil-producing states in the U.S.
I know you can bang out at least two of them off the top of your head.
After all, how many times have you and I talked about the veritable oil fortune beneath Texas soil?
Whether that crude is being extracted from the Eagle Ford in the south or the Permian Basin in the west, together those two mammoth regions pump about 4.8 million barrels of oil every day, or roughly 43% of the United States’ total crude output today.
And that’s just TWO Texas plays.
Not only does Texas produce more oil than anyone else, but it also out-pumps the next 10 highest-producing states combined!
That’s a lot of crude, but none of this should come as a surprise to you.
I’ll even bet you know our second-best producer.
For the last 10 years, one of the hottest oil patches in the country has been the Bakken in North Dakota.
The Peace Garden State was the darling of the U.S. oil industry as drillers ramped up the state’s oil production to more than 1.3 million barrels per day, helping to make the Bakken one of the most well-known oil plays in the world.
Here’s where the question gets tougher.
Can you name the third without looking?
Don’t worry, you’re not alone. Most investors today couldn’t tell you.
But knowing this answer will give you a leg up as U.S. oil production swells in 2019 to 11.9 million barrels per day.
Peak Oil’s Revenge
Had you asked me this question a decade ago, my choices would have been simple: California or Alaska.
That was pretty much true even five years ago, when these two states together averaged over 1 million barrels per day.
Unfortunately, here’s where things get ugly... and give you insight into a few peak oil realities.
Both California’s and Alaska’s crude outputs have been in an irreversible deathward spiral since the 1980s.
Take a look for yourself, but I have to warn you it’s not pretty:
Click Chart to Enlarge
In 2016, California’s oil production dipped below 500,000 barrels per day for the first time in decades... and it’ll never get that high again.
Alaska’s own daily crude production, meanwhile, is at a point not seen since the summer of 1977.
This is a bigger problem than you might think. That’s because virtually all of Alaska’s production comes from the North Slope. In order to get their oil to market, drillers transport it via the Trans-Alaska Pipeline System (TAPS for short).
What’s the big deal, you ask?
For starters, you need a lot of oil flowing through this 800-mile pipeline system. Less oil flowing through the pipeline means oil cools quicker and thickens, which can clog up the whole system.
When production falls below 350,000 barrels per day, the entire system is in danger of being shut down.
So, there wasn’t much concern when the North Slope was producing over 2 million barrels per day in 1988.
Sadly, the cold, bitter truth of the matter is that Alaska’s oil production has declined by more than 75% over the last 30 years!
Take another look at that production chart above, and you tell me how bad things have gotten for states that didn’t tap into their tight oil resources.
But... what about the ones that did?
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The Greatest Oil Boom Nobody Knows About
I don’t think anyone saw what was about to happen next.
I would be impressed if you knew New Mexico was the third-largest oil-producing state in the country.
After declining for nearly 20 years, New Mexico’s oil production started slowly rising in 2007. Between 2007 and today, the state’s crude production has surged over 300%.
Nothing — not even two horrendous oil price crashes — was able to stop these drillers.
Now, more than 650,000 barrels of oil is extracted in New Mexico on a daily basis.
There’s an all-time record of over 100 drilling rigs running in the state.
At the center of it all is a very familiar name: the Permian Basin.
We’ll dig into this quiet oil boom deeper next week.
Until next time, Keith Kohl A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.
Until next time,
A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.
Energy Demand will Increase 58% Over the Next 25 Years
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