US oil drillers could put 500,000 b/d of production online within six months if global prices rise to $80/b, according to a new study by a former chief of the Energy Information Administration.
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The projection reflects that US oil production can respond much faster to rising prices than it has in the past, but it remains far from achieving swing producer status, Richard Newell, president of nonprofit Resources for the Future, said in an interview Tuesday.
In a study for the National Bureau of Economic Research, Newell found that US drillers are now nine times more responsive to price since the adoption of unconventional drilling.
"I would not have guessed that the magnitude of the difference was quite as dramatic as we found," Newell said, adding that an earlier study found natural gas drillers were three times as responsive to price.
"I thought that sounded like a lot," he said. "When we did oil and it's even more dramatic, that surprised me."
The study divided the drilling process into three stages: the decision about whether to drill, well completion and production over time. It examined the "price responsiveness" of each stage and compared conventional versus unconventional drilling.
Newell said researchers found very little responsiveness to price in the last two stages.
"It really is all being driven up front by the drilling decision," he said.
Despite the gains US drillers have made in being able to quickly respond to global prices, they will never be able to inject supply on the order of 1 million b/d onto the market within 30-90 days like swing producer Saudi Arabia or international strategic reserves, Newell said. While some US tight oil wells come online in two-four months, others can take up to a year.
"Even if you started drilling today -- massive drilling -- you would not be able to bring on that much oil in that amount of time," he said. "The US industry operates according to market principles ... we don't let spare capacity sit around."
Newell was EIA administrator from 2009-2011 and also served as the senior energy economist on former President George W. Bush's Council of Economic Advisers.