OPEC's Crisis of Confidence

Keith Kohl

Written By Keith Kohl

Posted March 12, 2013

“We’re getting closer to it each month. You just watch… Soon they’ll have everyone believing it’ll happen, teasing us that one day, we’ll break past our old peak,” my friend told me.

I swear he says the same thing every time I pass by his place on my way through Minot, North Dakota…

I had stopped off during my drive one cold morning in a long string of cold mornings (the temperature wasn’t even half of what it was back in Baltimore).

Yet it wasn’t the guy’s weatherbeaten face and sour demeanor that held my attention.

It was the fact that our domestic crude production topped 7 million barrels per day in December — for the first time nearly twenty years:

us production 3-12

I can’t tell you what impresses me more: the fact that U.S. oil production is this high, or that 42% of our entire daily output comes from two states, Texas and North Dakota.

And there’s a frightening addition to this statistic: If you include production from Federal Offshore areas, the share of our total crude production jumps to an incredible 62%.

We’re certainly headed in the right direction, but I still wouldn’t hold my breath. Not just yet.

I wanted to tell my friend as much, but I knew it wouldn’t do any good.

The good news from those two states is matched by the ever-declining production from the third- and fourth-largest producing states, California and Alaska:

Top 4 us producer 3-12

What was I going to tell him — that the “good news” we all keep hearing is mostly inflated hope… or that having a bit of cautious optimism never hurt anyone?

Whatever it is, it has OPEC members shaking in their boots.

A Crisis of Confidence

Trust me when I say it takes a lot to rattle OPEC members.

Losing one of their most outspoken price hawks with Chavez’s recent passing might’ve been just enough to do it. But to hear the United States — far and away the largest oil consumer on earth — is going to need less oil imports going forward is enough to send OPEC members into panic mode.

The crucial part for OPEC in all of this is not importing less oil to the United States.

I don’t believe they’re really worried about our imports. They couldn’t care less if U.S. oil and gas production continue increasing.

In fact, we saw evidence of that in OPEC’s 2012 World Oil Outlook.

Long-term declines in oil consumption in OECD countries are offset by a sharp increase in Asian demand, which reaches 90% of that of the entire OECD by 2035:

WOO Oil Outlook 3-12

OPEC is concerned with the security of their future in Asia.

Their prize lies within developing countries like India and China, where demand is set to skyrocket over the next 20 to 30 years.

And the only thing that stands to jeopardize that market… is us.

OPEC’s Worst Fear

What OPEC fears more than anything else is U.S. drilling technology spreading like wildfire across the globe.

This would render demand much less promising in parts of the world that are not currently experiencing the kind of oil and gas boom North America has been enjoying for the last few years.

Utilizing two well-known technologies together during the drilling and completion phases has unlocked a wealth of natural gas resources beneath U.S. soil. (Granted, it took almost two decades to get it right — but our energy boom took off when George Mitchell successfully combined horizontal drilling and hydraulic fracturing.)

And hydraulic fracturing isn’t the technological breakthrough that will take our oil and gas boom global…

Even now, the United States is the only country to take advantage of unconventional shale deposits to dramatically boost production.

China holds much more potential shale gas than we could ever dream of. In fact, our own Energy Information Administration calculated the total amount of recoverable shale gas reserves as over 1.2 QUADRILLION cubic feet!

Think of the impact it would have on OPEC’s plan to ship their oil and gas exports to Asia if China could suddenly develop its own resources…

Now image what will happen when we perfect this lethal technological combination…

It might surprise you to learn we already have.

Within a matter months, companies have managed to lower the exorbitant costs associated with drilling and completing wells in our massive shale formations. Moreover, a few companies have succeeded in drastically cutting the number of days it takes to drill a well.

This revolutionary technique elevates our shale boom to new heights, crushing drilling records in the process.

Soon, any company not using this technological breakthrough will be forced to adapt or go out of business…

I’ve even read reports that one company drilled 36 wells on a single pad!

It’s happening right now. Look for my new report on this ground-breaking technology to hit your inbox in less than two weeks.

Until next time,

Keith Kohl Signature

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.

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