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U.S. oil production will reach near record highs in 2016

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The U.S. Energy Information Administration (EIA) released its Annual Energy Outlook 2014 Early Release Overview on Monday, which is forecasting the production of oil in the U.S. rising to near record highs in the next two years, while the production of natural gas is expected to rise for decades, according to the government forecast. The report contains baseline projections for U.S. energy production, consumption, and imports through 2040.

In 2016, crude oil production is expected to be close to the historical high of 9.6 million barrels per day, a record set in 1970. While domestic crude oil production is projected to level off and then slowly decline after 2020, natural gas production grows steadily, with a 56% increase between 2012 and 2040, when production reaches 37.6 trillion cubic feet.

“The EIA report confirms that the United States really is experiencing an energy revolution,” said Pulitzer Prize-winning oil historian and analyst Daniel Yergin.

The EIA report also predicts that the price of gasoline in the U.S will drop to an average $3.03 a gallon (in 2012 dollars) by 2017, but then rise to about $3.90 over the following two decades.

Russia is currently the world’s largest producer of crude oil at 10.7 million barrels per day, followed by Saudi Arabia at 9.6 million barrels per day. In 2013 the United States produced a little over 9 million barrels per day. (Source: EIA)

Some other key findings of the AEO2014 Reference case include:

  • Natural gas overtakes coal as the largest fuel for U.S. electricity generation. Projected low prices for natural gas make it a very attractive fuel for new generating capacity. In some areas, natural gas-fired generation replaces power formerly supplied by coal and nuclear plants. In 2040, natural gas accounts for 35% of total electricity generation, while coal accounts for 32%. Generation from renewable fuels, unlike coal and nuclear power, is higher in the AEO2014 Reference case than in AEO2013. Electric power generation from renewables is bolstered by legislation enacted at the beginning of 2013 extending tax credits for generation from wind and other renewable technologies.
  • Higher natural gas production supports increased exports of pipeline and liquefied natural gas (LNG). In addition to increases in domestic consumption in the industrial and electric power sectors, U.S. exports of natural gas also increase in the AEO2014 Reference case. U.S. exports of LNG increase to 3.5 trillion cubic feet (Tcf) before 2030 and remain at that level through 2040. Pipeline exports of natural gas to Mexico grow by 6% per year, from 0.6 Tcf in 2012 to 3.1 Tcf in 2040. Pipeline exports to Canada grow by 1.2% per year, from 1.0 Tcf in 2012 to 1.4 Tcf in 2040. Over the same period, pipeline imports from Canada fall by 30%, from 3.0 Tcf in 2012 to 2.1 Tcf in 2040, as more demand is met by domestic production.

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