US oil production had been experiencing a downturn since its peak of 9.6 million bpd in 1970. As the country’s oil production declined and demand grew, crude imports skyrocketed. By 2005, crude imports reached 10.126 million bpd; comparably, imports were 7.23 million bpd in 1995.
However, this all changed following the ‘shale revolution’. Fast-forward to 2008 and this innovative technology had caused a jump in production, with imports falling due to a lesser demand. And the country’s output is on the rise still: for the week ending 10 November 2017, US crude production hit a record of 9.65 million bpd.
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In its ‘World Energy Outlook 2017’ report, the International Energy Agency (IEA) noted that the US is set to account for 80% of the increase in global oil supply to 2025, primarily driven by shale upsurges. US shale oil production growth has been forecast to rise by 8 million bpd from 2010 - 2025; more than Saudi Arabia’s highest oil production growth.
IEA also predicts that the US will become a net exporter of oil by the late 2020s. IEA Executive Director Fatih Birol said that, for the first time since the 1950s, “the US will become the undisputed global oil and gas leader for decades to come.”
This production increase will help the US evolve into an energy independent nation, reducing the country’s reliance on the Middle East.
In response to the surge of US shale, OPEC flooded the market with Middle Eastern oil as a means of hindering US oil producers’ output and profitability. The US is not an OPEC member, meaning the organisation cannot control or limit the country’s production.
But, it appears that low oil prices following oversupply will not get rid of US shale. In its 2017 ‘World Oil Outlook’, OPEC acknowledged that it was unable to eliminate American shale by flooding the market. The organisation now recognises US shale as a threat, and is coping with the new changes in the market by enforcing production cuts in an attempt to curb the oil glut. OPEC is expected to extend production cuts by nine months, taking them beyond the original March 2018 deadline.
In fact, OPEC suspects that US production will escalate quicker than expected. Consequently, OPEC’s Secretary General Mohammad Barkindo pleaded with American producers to cut their output in order to help balance the market.
Yet, there is a silver lining for OPEC. Although the US is set to become the largest producer worldwide, “the Middle East will still be the most important exporting region, especially for Asia,” Birol noted.
In April, US President Trump signed an executive order to expand offshore drilling in the Arctic, and to open up protected federal land for the purpose of boosting production. In mid November, the US government announced it was attempting to gather additional public input on Hilcorp’s proposed construction of artificial islands for drilling operations in the Beaufort Sea, off the coast of Alaska. And now, the Senate Energy and Natural Resources Committee panel has approved a bill which permits drilling in a section of Alaska’s Arctic National Wildlife Refuge (ANWR).
US Senator Lisa Murkowski said that only “a small part of the non-wilderness 1002 Area [of ANWR]” would be open for tapping into the potential oil reserves. This legislation is predicted to create thousands of jobs, strengthen national security, and provide an affordable and stable long-term supply of US oil. During a recent hearing, Murkowski guaranteed that development of ANWR would be ethically managed. “We will take care of our wildlife, our lands and our people,” said Murkowski.
Additionally, ANWR could provide new oil for Alyeska Pipeline Service Co.’s Trans Alaska pipeline system. As Alaska has no state income or sales tax, 85% of its revenues comes from the pipeline.
At present, the state produces less than 500 000 bpd; in 1988, daily production peaked at over 2 million bpd. “We’re basically hanging on, waiting for new supply,” explained Thomas Barrett, President of the Alyeska Pipeline Service Co.
With this order in motion, Alaska has forecast an increase in oil production for the third consecutive year.
Going into the new year, with oil production continuing to grow, it seems that America’s energy future is looking bright.