An official of the International Energy Agency said Tuesday that the U.S. can’t increase oil production significantly enough to lower prices this year, and will have to depend on the OPEC cartel to fulfill its pledge to boost output.
Keisuke Sadamori, IEA’s energy markets and security director, testified to the Senate Energy and Natural Resources Committee that the U.S. can’t be expected to supply additional oil this year to the global market than it is already producing because of pipeline constraints preventing the delivery of oil from where it is produced to consumers.
New pipelines in Texas, for example, aren’t expected to come online until 2019.
“The U.S. is increasing production at a very fast pace, but in a sense, market participants have already incorporated that very fast production growth,” Sadamori said. “The pipeline takeaway capacity is preventing further growth in the short term. It is really hard to expect U.S. production to grow significantly until pipeline takeaway issues are resolved.”
U.S. crude oil production hit 11 million barrels per day for the first time in the nation’s history, according to new oil statistics released by the Energy Department last week.
But gasoline prices are more than 50 cents higher than where they were a year ago, after OPEC and Russia for almost two years curtailed its production to drive up the price of oil, a key determinant in the price of gasoline at the pump.
Although the oil cartel and Russia have reversed that track in recent weeks by agreeing to increase production by 1 million barrels per day, governments continue to voice concern that oil supplies remain very tight. That could raise oil prices in the coming months, according to the Energy Information Administration, especially as the U.S. levels sanctions against Iranian oil, as well as other losses from OPEC members like Venezuela and Libya.
Sen. Maria Cantwell of Washington, the top Democrat of the committee, expressed concern that the shale boom has not lessened the U.S.’ reliance on OPEC to determine oil and gas prices based on how much member countries produce.
She said the “only effective way” to reduce fuel costs is to reduce dependence on oil by investing in electric vehicles and keeping tough fuel-efficiency standards that the Trump administration wants to weaken.
“Why is record level U.S. production not providing any relief at the pump?” Cantwell said. “It is clear that we cannot drill our way out of this problem.”
Sen. Angus King, I-Maine, similarly argued the U.S. should use oil more efficiently to offset higher prices.
“In Maine, a $1 change in oil and gas prices is $1 billion out of our economy and we are a relatively small state,” King said. “Those are the kind of numbers we are talking about that are really significant. There are two things [we can do]. One is to produce more, and the other is to use less. And that will affect price just as surely as an increase in production.”
Sen. Lisa Murkowski, R-Alaska, the chairwoman of the committee, said she is also concerned about pipeline shortages.
But she said U.S. oil production has prevented prices from rising even higher, and said the country should doing all it can to boost output even more.
“There’s somewhat of a silver lining,” Murkowski said. “Prices are higher, but it is not as bad as it could have been. And that’s largely because of significant increases in U.S. production. I believe our best course is to continue with our efforts to produce more oil here at home. I think there’s no substitute for U.S. production, for as long as we need it, even as we seek to diversify away from oil.”
