A new report published this week by the U.S. Energy Information Administration (EIA) highlights the extent to which domestic oil production is transforming our energy security.
Remember when politicians used to tell us that increased domestic production wouldn’t make any difference to global markets or oil prices? Thanks to our shale boom all that has changed: as EIA reports, even with unrest in places like Libya and Iraq, Americans have been largely shielded from the disruptions and price shocks that usually accompany tensions in oil exporting regions.
From EIA:
“Record-setting liquid fuels production growth in the United States has more than offset the rise in unplanned global supply disruptions over the past few years […] U.S. liquid fuels production, which includes crude oil, hydrocarbon gas liquids, biofuels, and refinery processing gain, grew by more than 4.0 million barrels per day (bbl/d) from January 2011 to July 2014, of which 3.0 million bbl/d was crude oil production growth. During that same period, global unplanned supply disruptions grew by 2.8 million bbl/d.”
While U.S. oil production is, and will continue to be a part of a complex global market, prolific domestic supply growth has helped to stabilize prices for consumers both here and abroad. As EIA also points out, the shale surge “has contributed to a decrease in crude oil price volatility since 2011.” In the last 13 months, the monthly average Brent crude price has remained in a narrow $5 range—trading between $107/bbl and $112/bbl.
EIA isn’t the only organization to make this observation. As a recent USA Today editorial put it, hydraulic fracturing “eases security threats emanating from both the Middle East and Vladimir Putin.” The editorial explained that even while Iraq, Libya and Syria are in turmoil and tensions in Russia and Ukraine continue to mount,
“Amazingly, as all this has transpired, U.S. gasoline prices have been stable, even falling. The domestic economy is picking up steam. And the stock market has hit all-time highs.”
A recent report from the Center for New American Security came to a similar conclusion explaining, “internationally, new U.S. oil supplies have helped to cap the price spikes caused by severe global supply disruptions and to moderate oil prices for consumers.”
A report from Fitch Ratings reinforces this:
“… all oil-consuming countries benefit from the stabilizing effect of increased U.S. output on world oil prices. This is the benefit of energy interdependence — the linkage of U.S. and world oil markets through reduced imports of crude and increased exports of products.”
Fortunately for us, this is not a transient trend. The EIA estimates that domestic crude oil production will average 9.3 million barrels a day next year—a 43% increase from 2012, and a near doubling from 2008. Furthermore, advances in drilling processes and technology are continuing to push the gage higher. A recent Bloomberg article has the United States as the world leader in oil production; moreover, the International Energy Agency (IEA) found that the United States will be near energy self-sufficiency by 2035.
Increased domestic production has created hundreds of thousands of jobs across the country and increased local tax revenues. On top of being a boon to the economy, shale development has insulated us as well as our trading partners from what would have been an exceptionally volatile summer. That’s something we can all celebrate.