Posted December 9, 2015
The U.S. shale energy revolution is a game-changer – for the United States and the world’s energy balance. The U.S. has become the No. 1 producer of oil and natural gas, resulting from a domestic energy renaissance driven by advanced hydraulic fracturing and horizontal drilling – fracking. And the positive impacts are all around us.
U.S. crude imports are down, and American energy self-sufficiency is up. An America that’s more energy self-sufficient is more secure. Meanwhile, the global crude market is better supplied and more stable – thanks to the availability of crude that would have been imported to the U.S. Domestic pump prices reflect this well-supplied market. At the same time, greater use of natural gas has increased each American household’s disposable income by $1,200, and IHS says the benefit will grow to more than $3,500 in 2025. Thanks, fracking.
U.S. shale energy also is impacting the dynamics of the world crude market. Last year some major producers took steps to preserve market share – a sea-change decision, since historically they’ve opened and closed the crude spigot in an effort to affect prices. Columbia University’s Antoine Halff writes:
Last year’s watershed move, which some of OPEC’s core members – Saudi Arabia and Iraq – followed up with steep production gains, was widely misread as a sort of abdication. In fact it merely reflected the realization that new market conditions – namely the U.S. shale revolution – called for new policy measures.
Halff goes on:
The deeper issue involves the changing anatomy of global supply and the transformative impact of shale oil production. At roughly 4.5 million bpd, US shale oil production accounts for less than 5% of the overall oil market. But shale is a disruptive technology that challenges the industry’s long-established business model and the rules of the game for OPEC. … [S]hale oil has turned the long dominant narrative of supply scarcity on its head.
This is more than just an interesting energy/economic development. As the world’s leading oil and gas producer, the United States shouldn’t be a bystander while other nations try to shape world energy balance through crude markets. America shouldn’t be stuck on sidelines because of our own anti-competitive crude oil export ban.
Rather, U.S. crude should be free to compete with crudes from other countries – trade that would positively impact jobs, economic growth, domestic production and America’s ability to influence the global marketplace for the good.
This chart from Reuters’ John Kemp shows oil output from major producers since 2007:
You can see surging U.S. production (solid gray line), with other producers more or less maintaining their positions. The key point here is that two countries on this chart are currently restricted in their export of oil: Iran and the United States. With the lifting of international sanctions, Iran can begin to reclaim its role as a major oil exporter – the U.S. Energy Information Administration says Iranian oil could boost global supply by about 100,000 barrels per day by the end of this year and 600,000 barrels per day by the end of 2016.
Now, as for the United States …
Unfortunately, self-imposed sanctions on the export of U.S. oil, in place since the mid-1970s in response to the energy realities of a bygone era, hold the U.S. back. We’re watching others shape global markets, and we’re watching while others reap trade benefits. The kicker is that the U.S. is actually helping Iran to resume a major marketplace presence – while our export ban shuts in virtually all of our production, penalizes domestic producers and squanders opportunities for economic growth.
The export ban is a thing of the past, a relic of an energy-scarce (and scared) America. The U.S. isn’t that country anymore, a country whose opportunities were limited by energy concerns. Today’s limiting factor is the oil export ban, which Congress should end. API President and CEO Jack Gerard:
“The key here is to think long-term. … Five, six, seven years ago, no one would have predicted the United States would become the superpower of energy in this world, and yet that’s exactly where we are. And with the right policies that don’t restrict us, that don’t give the Iranians an unfair advantage over the Americans, we can achieve that potential. And that’s why the policy matters …”
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.