U.S. crude oil production is flirting with record highs heading into the new year, thanks to the technological nimbleness of shale oil drillers .
The current abundance has erased memories of 1973 gas lines, which raised pump prices dramatically, traumatizing the United States and reordering its economy. In the decades since, presidents and politicians have made pronouncements calling for U.S. energy independence.
President Jimmy Carter in a televised speech compared the energy crisis of 1977 to “the moral equivalent of war.”
“It’s a total turnaround from where we were in the ’70s,” said Frank Verrastro, senior vice president at the Center for Strategic and International Studies.
Shale oil drills can now plunge deep into the earth, pivot and tunnel sideways for miles until they hit an oil pocket, Verrastro said.
The United States is so awash in oil that petroleum-rich Saudi Arabia’s state-owned oil and natural gas company is reportedly interested in investing in the fertile Texas Permian Basin shale oil region, according to a report last month.
That is a far cry from the days when U.S. production was on what was thought to be an irreversible downward path.
“For years and years, we thought we were running out of oil,” Verrastro said. “It took $120 for a barrel of oil to make people experiment with technology, and that has been unbelievably successful. We are the largest oil and gas producer in the world.”
Shale oil drillers have spawned a revolution using high-pressure drilling, coupled with a mixture of water and sand, which breaks open — “fractures” — hard-to-reach oil pockets trapped in rock.
The major shale oil fields are in southern and southwest Texas, Montana and North Dakota, and Oklahoma, Colorado, Wyoming and parts of Nebraska. There are also deposits east of the Mississippi in West Virginia, Ohio, Pennsylvania and New York.
U.S. oil production averaged around 9.6 million barrels per day in 2017. The highest U.S. production based on monthly government data is above 10 million barrels per day, which dates back to 1970.
Production hit 9.58 million barrels per day in May 2015 before prices dropped because of an oil glut.
The resilience of U.S. oil producers has come as the price of crude rose above $60 per barrel on world markets. Many shale drillers can start and stop on a dime depending on the world oil price. The sweet spot for shale profit is in the neighborhood of $55 to $60 per barrel.
An expanding world economy and production cutbacks by Russia and the Organization of the Petroleum Exporting Countries have helped push prices above $60 per barrel in recent days.
The oil-friendly Trump administration has approved the controversial Keystone XL pipeline and is reportedly considering loosening offshore oil drilling regulations.
The Republican tax bill that President Trump signed into law Dec. 22 allows oil drilling in the Arctic National Wildlife Refuge in Alaska, a potentially rich pool but a move that conservationists oppose.
“This tax bill trades away a national treasure — for what — oil we don’t need,” said David Yarnold, president of the National Audubon Society, in a statement last week. Yarnold called the Arctic Refuge “one of the Earth’s last wild places.”
U.S. average daily oil production of 10 million barrels a day wasn’t thought possible a few years ago. Daily U.S. output plummeted to 3.8 million barrels per day in September 2005 and again in September 2008.
That’s nowhere near the almost 20 million barrels per day in petroleum products that the United States consumes. But the volume of domestic production allows the United States to tamp down oil prices by maintaining supply.
The increased production “doesn’t make us independent, but now we have a lot of low-cost natural gas and low-cost oil. And we have become exporters of natural gas,” Verrastro said. “It’s a rosy scenario. At least for now.”
Brad McMillan, chief investment officer for Commonwealth Financial Network, said the various shale producers have coalesced into a few big players, resulting in more predictable production.
That results in a less volatile price.
“If producers can set the price, then oil companies can be a great investment,” McMillan said. “If they are forced to compete, oil companies won’t be.”
Recent U.S. oil production growth is almost entirely the result of offshore wells.