The price of oil crashed in late 2014, prompting the Organization of the Petroleum Exporting Countries (OPEC) to begin a price war to regain lost market share. Besides losing market share to other countries outside its own cabal, OPEC was losing share to the United States.
During November, oil prices dropped almost 22 percent, which represented the largest monthly percentage drop in 10 years. In response, OPEC may cut production. This cut could represent over a million barrels a day. Oil prices had reached a four-year high in early October.
A strange thing happened on the way to the forum, or at least, between the distillery and the gas pump. The United States went from being dependent on oil from the Middle East to being the worlds largest oil producer. It happened very subtly, without much fanfare and it was mostly predictable by those who were believers in the U.S.’s potential to be an oil producing powerhouse.
While many geopolitical events have contributed to a rise in the price at the pump, the pain felt there could have been so much worse if the U.S. hadn’t made such a big shift in its dependency on the oil-rich counties. For the first time, since 1973, the U.S. reigns supreme in crude oil production.
U.S. Oil Producing Powerhouse
Oil production in the U.S. has increased since 2011. Most recently, growth in production has increased in western Texas and eastern New Mexico. There has also been increased production in North Dakota and Montana and the Gulf of Mexico.
Over the past decade, U.S. oil production has more than doubled. This is largely due to the boom in shale oil production. The largest area for shale oil production is in the Permian Basin in western Texas. U.S. oil production was 11 million barrels a day by August 2018. Estimates by the Energy Information Administration is that the U.S. will continue this dominance through 2019, beating both Russia and Saudi Arabia.
Over the next seven to 10 years, U.S. production is forecast to hit 15 million barrels a day according to some industry experts. What further enhances U.S. oil production is that America has oil customers around the world. Late in 2015, Congress lifted a 40-year ban on the exportation of crude oil.
U.S. exports take oil to China, South America and Europe.
A couple of the reasons for the U.S. leap-frogging the historic oil production leaders is the use of fracking and technology.
Fracking has unlocked large quantities of oil and natural gas from underground sources. Technology advances in drilling have allowed for cost reductions that have helped the industry.
The only thing that hand-cuff’s America’s booming production is a lack of supplies and workers. On the plus side is that the U.S. is not beholden to a Middle East with its inherent conflicts and problems.