U.S. oil prices have rallied about 20% this month, reaching around $57 a barrel. The gain comes as uncertainty and fighting in Yemen spark worries over potential disruptions to the global oil supply.
Energy entrepreneur T. Boone Pickens expects the rally to continue, predicting crude will reach $70 per barrel by the end of 2015 and $90 per barrel in the next 12-to-18 months.
“You see what happened to the rig count. It’s gone down from 1,600 rigs operating on oil prospects to 700. The Balkan has turned over and is in decline and the same thing is happening in Eagle Ford in South Texas,” Boone tells Yahoo Finance, referring to the recent decline in production of shale within the U.S.
“Just last Friday we had to draw on Cushing [Oklahoma] oil where we’ve stored 62 million barrels, so I’ll be right on this prediction,” he says.
Production of oil in North Dakota is now officially on a downtrend, with some analysts predicting supplies in Cushing will continue to fall, easing the U.S. oversupply of oil.
The Keystone Pipeline and renewable energy
The Keystone Pipeline, Boone says, “is like a gift. It’s 250 billion barrels of oil sitting in Fort McMurray, Alberta, available to us in the United States.” 250 billion barrels, he points out, is equal to the amount of oil the Saudi’s claim they have in reserves in the ground.
“Why are we in the Middle East?” he asks. “It’s because of oil and here we have that much oil available to us and we don’t have to have any military to make it available to us.”
Alternative renewable energy isn’t where it needs to be says Boone. “You’re going to live with and deal with oil for a long, long time into the future,” and the Keystone Pipeline would make that much easier. Boone says he’s for renewable energy but wants to be realistic about cost. “Today you have to subsidize wind and solar and I’m not for that.”
OPEC vs. U.S. Shale
Boone runs “Pickens Plan” an organization whose mission statement is to end U.S. dependence on OPEC oil. But the oil magnate doesn’t believe that the cartel is overproducing to drive shale producers out of the game. “They produce 30 million barrels a day and there’s only one country in OPEC’s 13 countries that’s capable of overproducing—Saudi Arabia,” he says.
Instead, says Pickens, Saudi Arabia chose to keep production steady over stabilizing the market. “The United States…produced too much oil and dropped the price. We went from four million barrels a day five years ago to 9.5 million barrels a day,” Boone says. “We are now the swing producer and we will adjust it for market reasons, not because the government says ‘shut down your production.’ We’ve done it before and we’ll do it again.”