Accounting conventions for liquids production
In addition to these three factors, which together contribute to the uncertainty in the future path of Saudi production, the choice of accounting conventions for measuring liquids production also affects which country is considered the world's leading producer at a given date. Using the broadest definition of liquids production, encompassing crude oil, condensate, natural gas liquids, biofuels, and refinery gain, the 2012 difference between U.S. and Saudi production is currently estimated by the U.S. Energy Information Administration to be less than 1 million bbl/d, considerably smaller than the gap of 3.5 million bbl/d when the comparison is restricted to crude oil production only (Figure 1).
Clearly, any prediction of a crossing in U.S. and Saudi production paths is highly dependent on many difficult-to-forecast drivers that primarily impact the level of Saudi production. For this reason alone, one simply cannot attach high confidence to any forecast that suggests the specific timing of any future crossing or re-crossings. And, as already noted, any declaration of whether a crossing has occurred will inevitably also reflect accounting conventions even after production data is already in hand.
While both U.S. and Saudi production trends are closely watched by market analysts, any future crossing of production paths is more likely to fall into the category of an interesting factoid rather than a watershed event. However, this observation does not undercut the overall importance of higher U.S. oil production. Along with changes in U.S. liquids demand, future trends in U.S. production will determine the share of U.S. use of liquid fuels provided by net imports, which has already declined sharply from its peak of 60 percent in 2005 to EIA's estimate of under 40 percent in 2013. Moreover, a higher level of U.S. production can significantly boost the U.S. economy and also tends to hold down world oil prices through its effect on global market balances. This latter effect was likely particularly important in 2012, when global spare capacity was already at fairly low levels even with a roughly 700,000 bbl/d increase in U.S. crude oil production over the 2011 level.
However, regardless of how much the United States is able to reduce its reliance on imported liquids, it will not be insulated from price shocks that affect the global oil market. And Saudi Arabia will likely continue in its unique role as the only holder of significant spare oil production capacity among world oil producers.