Prices will depend on the amount of supply and demand. After this year, companies are expected to dramatically increase production as new oil projects are introduced to the oil business, coming online with full production capacities. From 2008 to 2013, US crude oil production increased by 2.5 million barrels (EIA “Short Term Energy Outlook”). In fact, the International Energy Agency noted that "U.S. crude oil supply in 2013 registered the fastest absolute annual supply growth of any country in the last two decades, rising 15 percent in 2013." (IEA “Oil Market Report”, 2014). Culminating from this past year’s numbers, the Energy Information Administration believes that American production will continue to soar in 2014, adding 782,000 barrels, coming to a total of 8.3 million barrels a day. This paves the way for the U.S. to overtake Saudi Arabia and Russia as world's largest oil producer by 2017 (IEA, “World Energy Outlook 2013”).
The graph above, from the EIA’s “Short Term Energy Outlook” in 2014 illustrates the rising trend in US fuel production. Although it includes all liquid fuels, thus creating the discrepancy between the graph’s numbers and the numbers from the preceding paragraph, the growth trend is still evident.
The explanation of these seemingly meteoric rises in production comes from a variety of nascent projects. For example, the U.S. Federal Gulf of Mexico (GOM) crude oil production averaged 1.25 million bbl/d in 2013, and is forecasted to have 1.38 million bbl/d of GOM crude oil production in 2014 and 1.59 million bbl/d in 2015. There are eight oil projects expected to come online this year, with at least ten more being introduced in 2015, fueling massive production growth offshore. Furthermore, on-land oil shale production is on the rise, with resources from the Bakken, Eagle Ford, and Permian Basin (EIA, “Short Term Energy Outlook”, 2014).
Relating US output to world output, the EIA said it expects world supplies to increase by 1.7 million barrels a day in 2014 and 1.4 million barrels a day in 2015, with most of the growth coming from countries outside OPEC. The primary producers will of course be the U.S., Canada and Brazil. (EIA, Annual Energy Outlook, 2013). Unbridled US oil supply growth has caused global oil balances to appear oversupplied. As a result of this, and the potential return of Iranian crude exports, OPEC is expected to reduce crude production to offset this growth (EIA, “Short-Term Energy Outlook”). This comes as Iraq, one of the major players in oil production, faces less investment in crude due to concerns of deteriorating security and uncertain governance. EIA’s previous assessment of producing 6 million barrels/day by 2020 looks increasingly unlikely (EIA, Iraq Energy Outlook, p. 3). Nevertheless, oil industry executives say these supply shocks will not have the same impact on the market as in the past because of the offset from U.S. supplies, which will effectively neutralize any disruptions in supply...