Posted September 25, 2014
Supply matters. According to U.S. Energy Information Administration (EIA) chief Adam Sieminski, crude oil could cost at least $150 a barrel today because of supply disruptions in the Middle East and North Africa – if not for rising U.S. crude production.
Sieminski told the North Dakota Petroleum Council’s annual meeting that crude from the Bakken, Permian and Eagle Ford shale plays and others around the country has spiked in the past decade to more than 4 million barrels per day – enough to make up for outages in crude production elsewhere. Sieminski:
“If we did not have the growth in North Dakota, in the Eagle Ford and the Permian, oil could be $150 (per barrel). There is a long list of countries with petroleum outages that add up to about 3 million barrels per day.”
So, let’s rephrase things a bit: Clearly, U.S. production, adding to global supply, matters. A lot. Below is a look at that production, in an EIA chart showing the dramatic surge in output over the past few years – thanks, of course, to shale, advanced hydraulic fracturing and horizontal drilling:
The impact of U.S. production is echoed in a blog post by Forbes’ Christopher Helman, covering an energy outlook event in Houston:
It is a testament to the power of American oil and gas that prices have softened so much, even in the face of Middle East strife. Libya’s oil industry remains in chaos, with rival government arguing over who controls it. Iraq’s and Russia’s output has been flat. Iran is down to 3 million bpd from 3.7 mm in 2012. If the U.S. were not adding so many barrels, “oil would be sky high,” says (former Houston Mayor Bill) White.
And in a Reuters report concerning potential disruptions to global supply from military operations against Islamic State militants:
“The historic growth in U.S. oil production could easily make up the shortfall to global oil markets," if Islamic State facilities are wiped out, said a report released by Alaska Senator Lisa Murkowski, the top Republican on the chamber's energy committee.
Here’s how this matters to you. First, remember that because crude oil is an internationally traded commodity, the global market sets the crude price – which then is the No. 1 factor in prices at the pump. So, what would $150-a-barrel crude oil feel like? History offers a clue. Crude reached $147 a barrel in July 2008, and EIA records that the price of regular gasoline reached $4.11 per gallon on July 7.
Looked at another way, Tom Kloza, chief oil analyst at GasBuddy.com, told the New York Times last month that the effect of increased North American oil production, much of it from shale, saved American consumers up to $700 million a week though much of August compared with 2013. Kloza:
“It’s a relief. We can thank Texas, North Dakota and Canada.”
No question, skyrocketing American oil production matters – to U.S. security, to the economy and to individual households. With the right energy policy choices, safe and responsible domestic production can continue to grow, add to the global supply and could put downward pressure on prices.
It will require increased access to domestic reserves, a common-sense approach to regulation and policies that allow private investment in exploration and development, as well as new technologies, so that the U.S. energy revolution can keep rolling.
ABOUT THE AUTHOR
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.