According to conventional wisdom the US oil boom is moving the country towards energy independence and even has the Saudis shaking in their boots. Ambrose Evans-Pritchard reported on a dire warning by a leading Saudi businessman today.

Saudi Arabia and the Opec oil states must wean their economies off energy exports immediately or spiral into decline as America’s shale revolution shatters the world order, a top Saudi business leader has warned.

Once you get past the lede the article gets a bit more balanced noting that the Saudis are concerned about shale oil not just in the US but around the world and just as concerned about conservation as they are about new production. Some of them even discount the long-term prospects for shale, convinced they’ll be the dominant producer after the shale play pays out.

If you look at the US production figures there’s little doubt about the impact of shale.

But this graph from the WSJ Real Time Economics Blog stopped me a bit in my tracks.

Oops, what’s going on? Does this suggest production leveling off? That would be the intuitive guess but here’s some date I found on an interesting little site called Early Warning.

Note that rig count seems to increase ahead of increasing production. The author of the blog suggests there’s about a 2 year lag which would imply a flattening of production in 2014.  But the story doesn’t end there. I have a habit of reading comments to blog posts as you often find the best information there. In this case several commentators noted that rig count is misleading since multiple wells can be drilled from one rig. It’s called Octopus technology and here’s an example provided in one comment.

“Last year, Devon Energy (DVN) drilled 36 wells from a single pad site using Octopus technology in the Marcellus Shale. More recently, Encana (ECA) drilled 51 wells covering 640 underground acres from a single pad site with a surface area of only 4.6 acres in Colorado. Multi-well pad drilling is also revolutionizing drilling in Bakken, and this is definitely the long-term outlook for shale. It will become the norm.”

So I guess the moral of this story is that rig count doesn’t count for as much as it used to, we can’t derive much in terms of future production from rig counts and maybe the Saudis, who know a lot about oil and producing it, are right to be worried. That, of course, may be bad news for them but it is promising for us.