The American Petroleum Institute says the recent imposition of sanctions against Iran was the first major test of the muscular new fracking-based U.S. energy industry, and the fact that global supplies increased and gasoline prices keep felling shows that there is now a new boss in town when it comes to oil, News Radio 1200 WOAI reports.
Dean Foreman, the API's Chief Economist, told 1200 WOAI news that the U.S. oil industry, led by Texas fracking, was able to quickly ramp up production to meet the loss of Iranian oil due to sanctions.
"We have continued to supply therefore, virtually all of the world's oil losses, and to compensate for production losses among OPEC countries," he said.
Foreman said the world oil markets were using 'old style' thinking when they bid up oil prices in September and October, out of concerns that losing much of Iran's oil exports, as the world's fourth largest producer, would lead to supply shortages.
But in fact, the U.S., which is now producing about 11.4 million barrels of crude oil per day, was able to meet that challenge, becoming the world's 'swing producer' and rewriting the rules on energy which have been in place since the Arab Oil Embargo of the Mid 1970s, mainly that OPEC controls the supply, and through that control, is also able to control prices.
"From Saudi Arabia to Russia to the rest of OPEC, they're having to adjust to a new operating model on that basis," he said.
Foreman says while there are still challenges in the U.S. oil supply chain, primarily a lack fo pipeline capacity to get the oil from the Permian Basin to refineries, work arounds, mainly truck and train transportation, are being successful, and that pipeline capacity should be improving by late 2019.
He points out that global oil prices have seen a correction, meaning a fall of more than 20%, over the past two months, at a time when previously, the threat of loss of oil from a major player like Iran would have sent prices soaring.
He says the Saudis, which had indicated a willingness to push for increased OPEC production to cover the loss of exports from their arch-rival Iran has now indicated that increased production may not be necessary.
"They are cutting back because they don't think the world needs the additional barrels, and they didn't, going all the way back to last summer."
The U.S. is now the world's leading producer of oil and natural gas liquids, surpassing a position held for decades by Saudi Arabia and Russia.