While there have yet to be significant production declines from the major unconventional plays, one overlooked possibility for reducing US oil supply and thus supporting prices are the looming costs associated with a late-hour regulatory attack on the oil and gas industry, according to RigData’s RADAR Report.
As his tenure winds down, President Obama’s legacy-building efforts include a regulatory blitzkrieg targeting the oil and gas industry: new EPA limits on methane and ozone emissions from upstream operations, including methane venting and flaring. What’s really worrisome is how vulnerable most US oil producers are—the “little guys” who don’t produce much individually but in the aggregate comprise a significant chunk of US oil production. More than 770,000 wells in the US are classified as marginal wells—more than half of which are oil wells that produce an average 1.8 b/d. But in the aggregate, they were producing >736,000 b/d of crude oil as of 2012.
Oil priced below $40/bbl already threatens the survival of many of these producers, and the Obama regulatory blitzkrieg could be the final nail in the coffin.