Oil seen recovering by 2023 before investors shift goals
U.S. crude production will recover to pre-pandemic levels by 2023 but will start to level off around 2030 as Wall Street investment shifts from fossil fuels, according to a new Energy Department forecast.
The coronavirus pandemic has dealt a harsh blow to oil companies, which halted production and slashed funding for new wells as nations around the world enforced lockdowns. The EIA, however, predicts crude demand will recover as more Americans are vaccinated and restrictions are eased. U.S. crude production is expected to rise by 2023 to above 12 million barrels per day, a level last seen in 2019, the EIA said in its outlook.
Crude production, however, will start to plateau around 2030, hovering between 13 million and 14 million barrels a day through 2050, the EIA said. Peak production will coincide with Wall Street moving investment from oil and gas, the rise of electric vehicles and new climate policies to curb greenhouse gas emissions.
“The oil and natural gas industry was already headed toward relying on capital from cash flow instead of debt and equity,” the EIA said in its 2021 outlook. “COVID-19 has accelerated this trend, leaving producers more dependent on internal sources of cash flow because outside funding sources are less available or require higher rates of return.”
Still, U.S. oil production will remain at historically high levels over the next 30 years as the nation remains “integral” to the global crude market and a major supplier, the EIA said.
Oil produced in shale plays and the Gulf of Mexico will drive U.S. crude production for decades to come, the administration said.
The EIA, however, doesn’t expect oil prices to crack $100 a barrel over the next three decades.
“The oil price is the primary driver of projected drilling activity and accompanying U.S. crude oil production rates,” the EIA said. “Given the current economic downturn, EIA expects a lower price path in the short and medium term to decrease U.S. oil production rates.”