Oil prices have risen and stabilized over the past year, mostly on the back of production cuts by OPEC member-states. Experts are beginning to believe, though, that there could be another wave of price rises a couple of years down the line. The projections come from a study conducted by MIT.
Potential Flaw in Government Numbers
The American oil industry has been taking advantage of oil price increases this past year to pump its way into a shale production boom. Studying the situation, the Energy Department has tried to understand how it happened and draw up a picture of the future of the industry. In the Department of Energy’s reading of the American oil industry, technological improvements have been primarily responsible for the industry’s ability to quickly respond to increased demand.
The report has concluded that such improvements will continue to come online over the next several years, helping drillers pump more and more to meet demand.
MIT Study Projects Falling Production
The study by researchers at MIT found that while there have been technological improvements that have helped U.S. drillers, these have had little to do with the way in which drillers have raised production over the past year. Rather, American drillers have been rushing to the low-hanging fruit – the easiest and richest acreage to drill. Once output at these wells runs dry in a few years, they predict production will fall by as much as 10% by 2020. Technological improvements will not make up for the shortfall, the researchers believe.
The Oil Industry Isn’t Happy With the Inaccuracy
Incorrect results published by the Energy Department can have real-world implications. When the government forecasts high production rates well into the future, this causes prices to drop.
With the MIT study, however, corrections are beginning to appear. With less production foreseen, prices are bound to rise. According to Sigma Drilling Technologies, the pulsation solutions company that helps drillers with technology to prevent pulsation dampener bladder failures, U.S. drillers are responding in two ways. They are rushing to invest in new, second-tier oilfields in order to meet the drops in production when existing wells slow down. They are also expected to buck projections by continuing to invest in new technologies to coax significantly more production out of existing wells.
