The U.S.A. Needs More Oil!
Here in the USA, we use more oil than we currently produce. In late 2012, the US Energy Information Administration (EIA) reported that the U.S. produced around 7.03 million barrels of crude oil per day and imported about 7.58 million barrels per day, for a total of 14.61 million barrels of oil per day. As of 2013, the United States consumed an average of 18.89 million barrels of oil per day. So, as you can see from simple mathematics, the U.S. is using more oil than we currently produce and import. This creates a demand for oil in the United States. This is also the contributing factor for why we are paying so much per gallon of gas at the pump, as gasoline is refined oil. Oil is priced by the barrel (42 gallons) and as of July 2014, the price per barrel of oil is over $100. In retrospect, in the late 90s, when gas was only $.99 per gallon at the pump, the price of oil was between $8 and $15 per barrel.
As America becomes more dependent on oil exporting countries such as Canada, Saudi Arabia, Mexico, Venezuela, and Russia, which are the top 5 countries the U.S. imports oil from, our foreign relations become increasingly vital to the price we pay per barrel. One of the leading organizations that affect U.S. and global oil prices is OPEC (Organization of the Petroleum Exporting Countries).
OPEC is an international organization and economic cartel whose mission is to coordinate the policies of oil producing countries. The member countries are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela. As of late 2012, the OPEC countries’ share of world crude oil reserves was 81%. That equates to over 1.2 trillion barrels of oil in reserves. Political risk factors affecting the price per barrel of oil in the U.S. can be a result of political relations, international security concerns, international agreements, and domestic oil booms such as U.S. shale discoveries. For example, the price of oil may increase when certain countries such as Iran pledges to increase its production and OPEC’s informal leader, Saudi Arabia, does not agree. The escalated tensions create speculation that OPEC leaders will restrict import quantities to the U.S., which will result in upward pressure on oil prices. Conversely, as the US begins to discover new production trends and proven reserves, such as the U.S. shale boom, this creates downward pressure on oil prices. In order for the U.S. to become more independent from foreign oil, domestic oil companies MUST drill and produce oil to increase proven reserves and daily oil production. In addition to lucrative returns, American investors owe it to themselves to support domestic oil exploration.
Major oil companies such as Exxon Mobile, Chevron Corporation, Conoco Phillips, Valero Energy, and Marathon Petroleum generate annual revenues of between 25 billion to over 400 billion dollars. The primary focus of the major companies is to consistently replace depleting reserves with new, proven reserves. By definition, this is called reserve-replacement ratio (RRR). Outside of spending billions of dollars in exploration attempts to find new reserves, major oil companies are constantly seeking to acquire mid-range companies that have proven under-developed reserves (PUD). In many cases, once major companies acquire these mid-range companies, this leaves opportunity for small independent operators to pick up leases that major companies would otherwise find too small and not meet their economic viability.
The above overview is a few paragraphs taken from the comprehensive report from the free Investor’s Guide, found below.
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