By Bonner Cohen
Demonstrating the dramatic shift in global energy production over the past few years, the U.S. Energy Information Administration (EIA) reports the United States remained “the world’s top producer of petroleum and natural gas hydrocarbons in 2015.”
According to EIA’s June 2017 estimates, U.S. petroleum and natural gas production first surpassed Russia’s in 2012, with the United States being the world’s largest producer of natural gas since 2011 and the world’s leading producer of petroleum hydrocarbons since 2013.
Low Prices, Rising Production
Throughout 2015, EIA notes, U.S. crude oil prices remained relatively low, with the spot price of West Texas Intermediate crude oil declining from $47 per barrel in January to $37 per barrel in December.
“Despite low crude oil prices and a 60 percent drop in the number of operating oil and natural gas rigs, U.S. petroleum supply still increased by 1.0 million barrels per day in 2015,” the report said. “U.S. natural gas production increased by 3.7 billion cubic feet per day, with nearly all of the increase occurring in the eastern United States.”
EIA credits the shale revolution, including hydraulic fracturing (fracking), for the United States’ oil and gas ascendance, stating increases in U.S. petroleum and natural gas production over the past several years “are directly attributable to tight oil and shale gas formations.”
In contrast to past actions to control oil prices by raising or lowering oil production in response to global supply and demand, Saudi Arabia did not reduce its petroleum production in late 2014 and 2015, even as oil prices fell and global oil inventories rose, the report states. Saudi Arabia’s total petroleum and natural gas hydrocarbon production rose by 3 percent in 2015. “Still, the United States produced more than twice the petroleum and natural gas hydrocarbons as Saudi Arabia produced in 2015,” the EIA report said.
‘Golden Era of American Energy’
The trends noted in the EIA’s report did not go unnoticed by President Donald Trump. In a June 29 speech at the U.S. Energy Department, Trump said, “The golden era of American energy is now underway.”
“Our country is blessed with true energy abundance, which we didn’t know of even five years ago and certainly 10 years ago,” Trump said. “With these incredible resources, my administration will seek not only the American energy independence that we’ve been looking for so long, but American energy dominance.”
In a second speech, Trump noted the growing U.S. production of oil and natural gas and substantial coal reserves position the United States to become a leading exporter of fossil fuels. In a not-too-subtle reference to Russia, Trump told a cheering crowd in Warsaw on June 6, “[W]e are committed to securing your access to alternate sources of energy, so Poland and its neighbors are never again held hostage to a single supplier of energy.”
Credits Technology, Property Rights
Merrill Matthews Jr., Ph.D., a resident scholar at the Institute for Policy Innovation, credits two factors with driving U.S. energy dominance: property rights and technology.
“Two main factors driving America’s oil and gas boom are technology and property rights,” said Matthews. “Property rights—more specifically, mineral rights—gave individuals and companies a financial incentive to drill to meet global demand, and that helped ensure technology was developed to make it happen.”
Craig Rucker, executive director of the Committee for a Constructive Tomorrow, says oil and gas innovation in the United States is causing dramatic geopolitical changes.
“What EIA’s data show is the days when OPEC could call the shots on the price of oil have gone the way of the horse and buggy,” Rucker said. “Thanks to fracking and horizontal drilling, we have an enormous competitive edge over our rivals, resulting in the United States displacing Russia as the world’s largest producer of natural gas.”
Bonner R. Cohen, Ph.D. (email@example.com) is a senior fellow at the National Center for Public Policy Research.