On Monday Chevron CEO John Watson warned that U.S. shale oil alone is incapable of meeting the world’s increasing demands for crude.
Global demand continues to grow by over a million barrels per day every year. Due to a revolution in drilling technology that allows drillers to unlock gas from shale rock formations, American producers are able to meet much of that consumption.
“Shale can help. Certainly between now and the end of the decade it will be a big contributor to meeting that million-barrels-of-oil-demand growth that’s out there,” Watson told CNBC’s “Power Lunch” on the sidelines of the Milken Global Conference in Los Angeles.
“But ultimately oil fields decline, and we’re going to need all sources of supply, including the shales, but also deepwater and other sources around the world,” he said.
Investment in oil exploration and development, like expensive offshore drilling projects, has declined as oil companies work to lower spending plans amid a prolonged crude price slump. That has the potential to cause the market to become undersupplied in the future, warned the International Energy Agency.
Meanwhile, U.S. shale oil production has rebounded as crude prices stabilize at about $50 a barrel, backed by output cuts by OPEC as well as several other exporting nations aimed at reducing brimming global stockpiles. The recovery has also been supported by declining service costs and efficiency gains in the U.S. shale oil patch.
That has caused a rush in the low-cost Permian Basin in parts of Texas and New Mexico, where Chevron is a major player.
Watson said President Donald Trump’s rollback of energy-sector regulations could kick-start the economy by removing rules and guidance that “were heaping costs on our industry with no discernible benefit,” he said.
Within his first 100 days, President Trump has put into play reviews that would remove limits on offshore drilling, rewrite Obama’s signature plan to reduce carbon emissions from power plants and potentially ease tough fuel efficiency standards.
Many environmentalists and Democrats argue that Obama-era measures were critical in efforts to reduce America’s contribution to climate change. By canceling them, the U.S’ attempts to mitigate the effects of global warming are significantly handicapped, they say.
Article written by HEI contributor Lydia Ezeakor.