U.S. crude oil production has increased by 3.3 million barrels per day since the end of 2016, an increase of almost 40 percent in less than three years due mainly to hydraulic fracturing and horizontal drilling. That U.S. oil increase supplied almost the entire increase in global oil demand over that period. Further, the Permian Basin in Texas, where 35 percent of U.S. oil is produced, will be able to increase its oil production by about one million barrels a day when new pipelines begin moving its crude in the next several months. That basin alone could supply enough crude to meet all of next year’s global demand growth. Add to this the fact that the Bakken field in North Dakota produced a record of 1.44 million barrels of oil a day in July and one can see that it is no wonder that the United States is the largest producer of oil in the world.
According to BP’s Statistical Review of Word Energy, in 2018, the United States produced 16 percent of the world’s oil (including natural gas liquids), compared with Saudi Arabia’s 13 percent, Russia’s 12 percent, and Canada’s 5 percent. In fact, the United States produced more oil than it imported last year.
Note: In this graph, EIA includes crude oil, natural gas liquids, renewable fuels and oxygenates (e.g. ethanol), and refinery processing gain.
The surge in U.S. oil production resulted in U.S. exports of crude oil and refined petroleum products to increase and imports to decline. The United States imported 60 percent of the oil it consumed in the mid-2000s compared to just 6 percent today, on a net basis. Crude-oil imports from Saudi Arabia decreased by about 60 percent—to about 600,000 barrels a day this year, from about 1.5 million barrels a day in 2008.
Eric Nuttall discusses the growth of U.S. shale
The United States also ranked as the world’s top oil exporter in June, exporting almost nine million barrels a day of crude oil and petroleum products, and surpassing Saudi Arabia, according to the International Energy Agency. At the time, Saudi Arabia was cutting its exports as part of the OPEC agreement. Because of Saudi oil facilities being attacked by drones in September, U.S. oil and petroleum exports that month were also relatively high. The Saudi Oil Minister, Prince Abdulaziz bin Salman, indicated that the kingdom restored half of the suspended production due to the drone attacks by around mid-September and would restore the rest by the end of September. In the meantime, the Saudis tapped the country’s strategic oil reserves to ensure regular deliveries to the global market. Saudi Arabia’s stockpiles of crude totaled 187.9 million barrels in June, allowing for just over a month of cover to make up for the shortfall.
The United States is achieving these records of oil production due to increased efficiency and productivity. Due to low oil prices, the oil rig count is at its lowest point since May 2017 at 710 rigs. Since the beginning of the year, oil rigs are down over 15 percent with the Permian reducing its oil rig count by 58 rigs. And yet the Permian could add another 4 million barrels per day of supply by 2022, increasing the prospect for even more oil exports. Texas by itself is expected to account for more new oil than any other country, except, of course, the United States. Over the next decade, new U.S. oil production is expected to be six to eight times larger than that of Canada, the next largest new supplier globally.
Today, U.S. crude oil production is averaging 12 million barrels per day—up from 11 million barrels per day last year. The Energy Information Administration, in its September Short-Term Energy Outlook, expects U.S. crude production to increase to an average of 13.23 million barrels per day in 2020.
The oil production boom has been a major factor in U.S. economic growth. According to the Federal Reserve, in the first two years of the Trump administration, the energy sector contributed to over half of the increase in industrial output.
Conclusion
The hydraulic fracturing and horizontal drilling boom in U.S. shale basins has made the United States the world’s largest oil producer. The lack of dependence on Middle East oil has finally given the United States a degree of energy independence such that military actions may no longer be our only option when disruptions occur such as the drone attacks on Saudi Arabian oil facilities. The revolution in energy production in the United States is one of the most significant stories of our time, and the story is still being written.
