The International Energy Agency is predicting that the United States will be the leading oil producer by 2015, largely in part due to hydraulic fracturing or “fracking”. With no signs that the surge in local supply will be slowing down any time soon, ideas of less reliance on imports and greater energy independence are also emerging.
While the current market surplus has removed the risk factor, leveling fuel prices across the country, a change in international fuel supply could create a different picture.
Three key international suppliers of crude oil are:
Why is production from these countries so significant?
There are a couple of main reasons. One is that domestic production in the US cannot keep up to its own present rate of petroleum consumption – 18.5 million barrels of oil per day – making it still very much dependent on imported oil. Second, they are the main providers of oil to the European Union.
What causes a supply disruption?
Supply disruptions can be caused by a number of things. The most common are unexpected operational problems, civil unrest, and natural disasters. Other possibilities in certain areas are military or terrorist attacks against energy infrastructure.
What events are happening to raise concern?
All three countries have been in recent news for different reasons.
In eastern Libya, protestors demanding political autonomy and oil profits from the Tripoli government have been occupying three different oil ports since late August of last year. Their presence has caused production to drop by about half or 600,000 barrels per day.
Another group of protesters have just lately blocked a pipeline in western Libya, although production has not yet been affected.
Iran is in a dispute with world powers over its nuclear program. Negotiations are expected to start in February 2014, but it has resulted in sanctions against the country’s oil exports, amounting to about 1.5 million barrels per day.
And Nigeria is experiencing theft. An estimated 150,000 barrels per day are being siphoned from pipelines and sold on the international black market. Production is also impacted when pipelines damaged by thieves have to be shutdown for repairs. The value stolen since 2010 is now into the billions.
How does this affect fuel prices?
Geo-political issues in these regions, such as those mentioned, affect the Futures Market, trade participants and how much of a fair premium they think the market needs. The activity going on will be analyzed which will help determine the resulting price.
If there’s a disruption in supply or in the transport of that supply, causing the US or Europe to be unable to depend on that production coming back, then prices will go up. Conversely, when supply is strong and uninterrupted, prices are more likely to stabilize or come down.
Waiting and watching as global events develop can be of concern in terms of pricing, availability and making the best decisions for your business. However, peace of mind is not a world away when you work with an industry expert. Your fuel distributor will meet with you to answer questions, provide advice and offer solutions. They pride themselves on customer service and want to see you succeed. It’s a partnership that will go the distance.