The United States of America recently surpassed Russia and Saudi Arabia to emerge as the top producer of crude oil, according to new data released by the U.S. Energy Information Administration (EIA). The USA’s new status could be short-lived, as both its nearest competing nations have ramped up production in recent weeks to fill a growing void in Iranian production in the wake of re-imposed U.S. sanctions, but the fact that the U.S. arrived at that point at all is an extraordinary achievement.
A decade ago, the most common phrase used to describe the domestic U.S. oil industry was that “all the whales are gone,” with “whales” meaning big, new sources of oil that had the potential of starting a new boom. The Permian Basin was considered a “dead” region, where the biggest potential for increased production lay not in finding new productive formations, but in going into old existing wells and re-working them. The Eagle Ford Shale was known mainly as a nuisance formation from which drillers would get a small kick of gas whenever they drilled into a deeper conventional formation. At that time, the U.S. was importing about 2/3rds of its daily oil needs, and the general outlook was that the percentage of imports would only rise over time.
But then, in October of 2008, a large independent producer named Petrohawk drilled the first economic oil well in the Eagle Ford Shale formation, and America’s energy outlook turned 180 degrees. Since the revolution in shale oil production began, total U.S. crude production has now doubled. Never in its history has the domestic oil industry produced as much oil as it now does every day. In 2017, U.S. net imports of crude oil amounted to just 19 percent of the country’s daily consumption. Thus, while the country has not become completely energy independent, it has become vastly more energy secure.
None of this happened by accident – it has taken place due to a combination of human ingenuity, good public policy and the luck of geology. The human ingenuity came when scientists in the oil and gas industry developed the means of combining the dual technologies of hydraulic fracturing and horizontal drilling to enable the extraction of oil and gas from shale rock.
The good public policy has come in several forms. First, and probably most importantly, there has been the refusal by state and federal officials of both political parties to give in to the bullying tactics of the anti-fracking movement that wants to outlaw hydraulic fracturing and deny all this cheap and abundant energy to the public. New York state is a noted exception to this, and some local government have also implemented outright or de facto bans on hydraulic fracturing. But the technology remains by and large well-regulated, legal and an extraordinary benefit to the U.S. economy and environment.
Second, we had the December 2015 congressional action to repeal the 1970s-era ban on crude oil exports, which was signed into law by President Barack Obama as a part of an omnibus spending bill. That smart piece of public policy has allowed the oil boom to continue largely unimpeded by bad policy during a time of increasingly-limited refining capacity in the United States. Finally, the Trump Administration’s rollback of some of the most excessive Obama-era regulatory actions has also helped enable the current industry boom times.
Then there’s the luck of geology: The United States is blessed with the most diverse and prolific collection of productive conventional and unconventional (including shale) formations of any nation on earth. Simply put, there’s just a lot of oil and gas beneath the nation’s surface; thus, it should come as no surprise that an industry largely unencumbered by bad public policies would be able to produce a boom like the one the country is currently experiencing.
It’s the classic three-legged stool, one that requires all three legs to remain firm in order to work. As the EIA’s latest data shows, it’s working better than any other stool on earth.