Earlier this week, this blog examined the IEA projections about the future of domestic oil production and how it will affect the need for oilfield equipment. While many analysts are confident in the fact that the United States will overtake its global competitors as the planet's number one oil producer, at least one individual is questioning whether or not doing so is fiscally possible.
In an article in The Energy Collective, contributor Gail Tverberg suggests that the IEA's projections are unrealistic because it doesn't account for the high costs of extracting oil. One point she argues is that the IEA uses exceptionally low oil prices in its projections because it doesn't consider the rising costs of all oilfield operations.
"If higher prices put the economies of oil importing nations into recession, then oil prices will drop lower, reducing the incentive to invest in new oil production infrastructure," Tverberg writes. "In fact, we could find ourselves reaching 'peak oil' because of an economic dilemma: while there seems to be plenty of oil available, the cost of extracting it may be reaching a point where it is more expensive than consumers can afford. As a result, some oil that we know about, and have been counting as reserves, will have to be left in the ground."
If this assertion is to be agreed with, that simply puts greater emphasis on the need to improve oilfield operational efficiency. Implementing new technology that offers a strong return on investment is of the utmost importance because savings experienced in the field increase profit margins and make additional capital available for future investments. Any efforts made to improve extraction processes can, if done properly, reduce costs and help the United States reach its self-sustainability goals, but it all starts with having the right equipment.