U.S. Oil Production Hits 30-Year Low

Portraying a “bleak picture” for the U.S. petroleum industry, the American Petroleum Institute said Wednesday that domestic oil production is falling at an annual rate of 300,000 barrels a day.

API, the industry’s leading trade group, reported that domestic production fell in 1991 to the lowest fourth-quarter level in more than 30 years. It attributed the drop to weak demand and poor investment opportunities that encouraged U.S. companies to focus exploration efforts overseas.

“The evidence indicates that the exploration and production sectors of the petroleum industry in the United States have entered a period of accelerated decline, while there is accelerated growth overseas,” said Edward H. Murphy, the institute’s director of statistics.

Since 1978, when U.S. petroleum use peaked, annual consumption has declined nearly 12%, reducing oil’s share of total energy consumption in 1991 to just over 40%, the lowest level in four decades, the trade group said.

Demand was so weak last year that oil imports fell to 45.5% of domestic deliveries from 47% the previous year. But the report suggests that reliance on imported oil will increase unless tax law “impediments” are revised and Alaskan and offshore fields are opened to drilling.

API said the drop in crude production toward the end of last year was “substantial and largely unanticipated” after output stabilized in late 1990 and the first half of 1991. In the fourth quarter, Alaskan production dropped 2.7% from the year-ago period, while the Lower 48 states’ production was off 1.8%, bringing that region’s output for the year to the lowest level since 1950.

API said volatile oil prices and depressed natural gas prices were factors in the production decline. But an “antagonistic investment environment” was viewed as the underlying cause.

Unless U.S. energy policy is revised to make domestic drilling more lucrative, the current rate of decline of 300,000 barrels per day will accelerate, the report said.

The industry contends that 25% to 50% of the country’s oil reserves are in Alaska and in offshore fields in California and Florida that have been closed to drilling.