Michigan is famous for many things, but oil is not one of them. The state is probably best known for the Detroit automobile manufacturing plants which enjoyed their heyday until the recession hit. The state also enjoys having more shoreline than any other US state, other than Alaska, with over 11,000 inland lakes and an estimated 36,000 miles of streams. However, Michigan is about to reveal a commodity so valuable that it has the potential to change the way the United States sources its energy. It is now increasingly evident that oil wealth is not exclusively available to those in cowboy country in Texas, or the sheiks of the Middle East.
A Shift in US Foreign Policy
The US remains the world’s largest consumer of oil, which is primarily imported from the Middle East and Latin America. There has been a growing move to make America more energy independent, by tapping into the country’s vast natural resources of oil and natural gas. The theory is that by safely drilling for oil and natural gas at home, America will be able to lessen its reliance on Middle East oil. This means that the US will soon be able to enjoy greater price stability, job growth, and more self-sufficiency in catering to its own energy needs. By obviating the geopolitical uncertainty that racks the Brent Crude Oil markets, the US may well be able to stabilize prices for its most treasured asset – liquid gold.
Michigan Oil Waiting to be Tapped
Leading from the front is RP Capital Funds based in Michigan. The company has fostered long-standing relationships with Michigan families, spanning several generations. It is against this backdrop of having built strong ties to the community that RP Capital Funds enjoys land lease participation in oil and gas drilling prospects. Presently, Michigan is ranked #1 in the US for natural gas storage. The state also enjoys a relatively high ranking for gas production (#11 in the US) and oil production (#17 in the US). The US Geological Survey pegged the number of oil barrels recoverable in Michigan at 990 million.
Major US Energy Sources
According to the EIA, US energy consumption includes: oil, nuclear energy, coal, renewable energy and natural gas. Oil is used for 92% of the energy required for the US transportation industry, but it is only used in 1% of electric power generation. A single barrel of oil equates to 42 gallons. The total energy consumption last year was 97.5 quadrillion Btus with each quad accounting for 172 million barrels of oil. These figures are enormous, so it’s easy to understand why US companies like RP Capital Funds are increasingly looking to domestic sources of oil and natural gas to satisfy American demand. According to multiple official reports, the US may be able to wean itself off Middle East oil by as early as 2035. This is largely thanks to massive discoveries of oil in shale-rock, deep within the crust.
Crunching the Numbers
Brent Crude is expected to trade at $105 per barrel in 2015, while West Texas Intermediate (WTI) is expected to fetch $96.08 per barrel in the upcoming year. Standard gasoline prices in the US averaged $3.61 in July, down $0.08 from June. This decline is expected to continue throughout the year, with an average of $3.50 per gallon forecast. For 2015, the average price is expected to drop to $3.46 per gallon. The world’s top 5 oil producers (2012 figures: thousands per day) include the following countries:
- Saudi Arabia – 11,726
- USA – 11,109
- Russia – 10,397
- China – 4,372
- Canada – 3,856
Provided safe drilling practices are put in place and the EPA is satisfied the only hindrance to widespread tapping of US natural resources lies in political opposition to it. The US certainly has the capacity to provide for its own energy needs and this will have a profound impact on its foreign policy approach moving forward.