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Page 34 of 51

Read online @ B A K K E N O I L B I Z . C O M / d i g i t a l - j o u r n a l 35 Read online @ B A K K E N O I L B I Z . C O M / d i g i t a l - j o u r n a l 35 (406) 443-6820 collapse. Unlike the early 80s price surge, oil prices were not manipu- lated higher in the early 2000s. They rose due to natural forces of supply and demand. In 2005 oil prices av- eraged $54 per bar- rel, a near doubling from the $28 per bar- rel at the start of the decade. It's often said that 2005 marks the official start of the 2000s raging bull market in oil that lasted for almost ten years. Between 2000 and 2005 OPEC increased its crude and NGL production by 4 mil- lion barrels per day. Total daily produc- tion inched up from 30.7 million to 34.8 million barrels. However the increase was insufficient to meet the growth in global demand, which rose more than 7 million barrels per day during this pe- riod. With OPEC's excess capacity virtu- ally exhausted, the additional increase in supply had to come from non- OPEC sources. Meanwhile, be- tween 2000 and 2004, non-OPEC production rose from 46 million bpd to 49 mil- lion bpd (all liq- uids). However, non-OPEC supply stalled at around 49 million bpd and stayed at that level from 2004 to 2006. In 2007 it crossed the 50 million bpd mark. The pressure on non-OPEC producers to increase output could only translate into a sizable increase in prices, which in turn encouraged the industry to sig- nificantly increase capital expenditures. WORLD SUPPLY HITS A WALL ... U.S. SUPPLY TO THE RESCUE Yet, as prices exploded higher and capi- tal spending set record after record, something curious happened: Non- (Source: CIBC) URL: images/tinymce/2016/Pushinghard2.jpg OPEC all-liquids supply (ex-U.S.) ground almost to a halt. After crossing 43.4 million bpd barrels in 2007, non-OPEC (ex-U.S.) all-liquids supply increased by a measly 1.5 million bpd over the next seven years, a period during which de- mand increased by over 6.6 million bpd. In fact, between 2010 and 2014 non- OPEC (ex-U.S.) supply did not grow. It av- eraged around 44.5 million bpd for five years while demand increased by 4.1 million bpd during this time. OPEC did marginally better than non-OPEC supply (ex-U.S.). OPEC production stagnated at 34.6 million bpd from 2007 to 2010, then increased to 36.6 million bpd by 2014. Powered by the shale revolution, U.S. supply was a different story. From 2010 to 2014 U.S. all-liquids supply grew by 4.2 million bpd, thus meeting global demand growth during those years pre- ceding the current crisis. Eventually, the large increase in shale production com- bined with the resumption of growth in OPEC production led to prices collaps- ing by late 2014. ‚ě§ continued, pg 38

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