The US economy is far less dependent on oil now than in year’s past, but we still consume a lot. Americans consume roughly 20 Million barrels per day, the most in the world. China is second at 12 Million. Demand has been growing, which is a really good sign for the global economy.
Russia is the largest producer, recently overtaking the Saudi’s. Both produce over 10 Million barrels per day. Someone else is right on their tail.
America’s shale boom has brought unwanted competition to OPEC, and less demand for foreign oil. The US is now producing 9.3 Million barrels a day. It is back near all-time highs. We produced 5 Million barrels per day just 6 years ago.
I was in Texas this week for my annual trip meeting with clients and visiting rig sites. 40% of US oil production comes from Texas. Most of the new production is coming from the Permian Basin in West Texas. Midland is booming! Drilling rigs and pumps were everywhere and active. Hotels and restaurants were packed and real estate prices have surged. It is the complete opposite from what I encountered there 2 years ago when the region was depressed from collapsing oil prices.
Technological innovation has made oil production much more cost effective. The US has led the charge and have completely disrupted the Energy industry and is driving OPEC nuts. The Middle East and Russia don’t know how to deal with the US producers because they’ve never had such nimble and strong competition.
The US has become the swing trader in global oil and that’s a powerful place to be. The Market enjoys this situation because the growing US Energy production adds stability and predictability to the global equation.
If you’re surprised that the DOW and S&P are holding up so well with the alarming issues in Washington and around the world, look no further than earnings growth and stable energy supplies. The credit markets are acting well too. 6 years ago the Market would have been rattled by these events. The Russians know it. The Chinese know it. Outside the drama of DC, big things are happening across the country. We are still believers in the future for renewables. But for now, in these challenging times, the world still runs on crude.
Happy Mother’s Day!
We will be back, dark and early on Monday.