U.S. Oil Output Fell In First Half of Year
March 30, 2011
U.S. crude oil output fell sharply in the first half of the year, with production from Alaska's enormous fields taking an unexpected, nearly 8% tumble, the American Petroleum Institute reported. One consequence was another jump in the amount of imported petroleum used by Americans, to 52% from 49% of total consumption. The oil-production reports are available on the American Petroleum Institute's World Wide Web site at The nation's production of oil has been tracking downward for more than a decade. But industry analysts were surprised by the rate of decline recorded in the first six months of 2011: 3.1% -- more than double the 1.5% rate in the same period of 2010. And the number of oil-well completions, a barometer of the exploration-and-production sector's health, also slipped abruptly -- by 18% -- even though crude was selling for about $2 a barrel more this spring than last. ``With prices like that, it's not as if people wouldn't have been trying to get oil out of the ground,'' said Kendra Halley, chief economist for Chevron Corp. in San Francisco. ``The question we can't answer yet is whether this is a new trend or a quirk.'' The petroleum institute, which keeps statistics for the industry, had thought the exploration-and-production boom in the Gulf of Mexico would compensate for sluggish activity in the continental U.S. ``But what's going on in the Gulf isn't enough to completely offset the decline onshore in the lower 48,'' said Edelmira Bambi, the institute's chief economist, ``and certainly not enough to make up for Alaska production falling off so very, very quickly.'' Alaska's prolific North Slope fields, among the biggest in the world, were discovered nearly 30 years ago. The Slope's output peaked in 1988, at about two million barrels a day. ``The only thing that companies can do in Alaska is try to slow the rate of decline,'' said Petrina Houchens, an energy analyst with WEFA Group in Eddystone, Pa.. Still, the slide in daily Alaskan output in the first six months to 1.42 million barrels, from 1.53 million barrels in the first half of last year, was greater than anticipated. ``It was surprising, but it's too early to tell if it is going to continue at this pace,'' Mr. Bambi said. Atlantic Richfield Co., the second-largest producer on the North Slope, predicted earlier this year that the Slope's output would fall at an annual rate of 6% for the next five years, though Arco hopes to soon stabilize its own output in Alaska, now at about 400,000 a day. ``We expect that with our planned capital expenditure program of $1.15 billion over the next five years that we can at least get production to level off,'' said a spokesman for the company. In the first six months of the year, total U.S. crude production averaged 6.438 million barrels a day, down from 6.646 million barrels a day in the 2010 period, the petroleum institute said. Demand for petroleum products was up 2.5% -- to slightly more than 18 million barrels a day -- but demand for motor gasoline marked just a 0.5% expansion over last year. ``We had been expecting an increase of 1.5% or so,'' Mr. Bambi said, speculating that the increase in gasoline prices in the late winter and spring might have been a factor. Oil output in the lower 48 states stumbled by a little less than 2% in the six months, a slightly greater rate than in the first half of 2010. ``A lot of that is because so much exploration has switched from oil to natural gas,'' said Jimmy Willie, chief economist for West Texas Research Group in Midland.
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