How the Eagle Ford Impacts the Price at the Pump

EIA: Eagle Ford Expected to Produce 1.5 Million b/d in Sept. 2014
Eagle Ford Contour Map

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The Eagle Ford Shale is a powerhouse play for Texas, and it is even bigger than the last great Texas oil boom that began with Spindletop at the turn of the last century. Texans and all Americans are reaping the benefits of this modern day boom, and where this may be most evident is at the gas pump.

It wasn’t long ago that the price of a gallon of gas in Texas was well above $4 a gallon, and although Texans may still feel some pain at the pump, the prices could be much higher if it wasn’t for the Eagle Ford Shale and the oil and gas renaissance taking place in the U.S. Some industry professionals speculate the price of a gallon of gas could be as much $7 – $8 dollars a gallon if it wasn’t for the shale oil boom, made possible by advances in horizontal drilling and fracking.

Read more: North Dakota & Texas Make Up Half of U.S. Oil Production

What Determines the Price of a Gallon of Gas

According to the Energy Information Administration (EIA), there are four main components that go into the retail price of a gallon of gas:

  • Crude Oil (67%)
  • Refining Costs and Profits (14%)
  • Distribution, Marketing, and Retail Costs and Profits (8%)
  • Federal and State Taxes (12%)

The majority of the price, as shown by the breakdown, comes from crude oil, which is determined by commodities traders. World-wide supply and demand are key factors in influencing pricing.

With the U.S. poised to become the top oil producing country in the world by 2015, more supply has entered the world market, and that has ultimately impacted the price of crude oil. There are a number of other factors (i.e. global political upheaval) that are beyond the scope of this post, and they are all taken into account when determining the price of oil futures.

How the Eagle Ford Impacts Crude Oil Supply

The Eagle Ford alone produces nearly 1.5-million b/d. That’s more than half of total production for the entire state of Texas. The U.S. currently produces around 11-million b/d.

Read More: EIA: Eagle Ford Oil Production Will Hit 1.5-Million b/d – Sept. 2014

By comparison, Iraq, which is currently rated as the second largest OPEC producer, produced 3.2-million b/d in April of 2014. By June of this year, Texas’ total monthly production surpassed that of Iraq, as its production dropped below 3-million b/d.

Production growth is expected to continue in the Eagle Ford, and for the immediate future, it will remain a top supplier of U.S. crude oil. That equates to the Eagle Ford continuing to play a role in influencing the price of oil.

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Kirk Eggleston

Kirk Eggleston

Contributor at EagleFordShale.com
Kirk Eggleston writes on significant news developments in the Eagle Ford and Bakken Shale plays. He is a former broadcast journalist, and has experience covering news and politics in the Texas and Louisiana markets.

Comments

  1. Tom potter says:

    If oil production is increasing , why are my royalty checks decreasing every month,, even when crude oil price was 1.06.00. Per barrel . Dimmit county is supposed to be so great,,, why only two wells for a pool of 800 plus acres.???? No additional lateral lines added either. Is production waiting on completion of infrastructure? Absolutely no communication from Chesapeake. Sure would like to know what is going on . I suspect I am not the only one concerned.

    • Kirk Eggleston Kirk Eggleston says:

      Hi Tom,

      The determination of your royalty is subject to a number of factors, including but not limited to a well being shut-in, the well’s production decline curve over time, etc. Did your lease with Chesapeake include a “market enhancement clause” or any language about post production costs? In several oil and gas producing states, including Texas, an oil and gas company can deduct all post-wellhead costs when calculating royalty. Click Here to read a related blog post on our sister property – MineralRightsForum.com.

      – Kirk Eggleston, EFS Administrator

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