The U.S. expanded its oil production this year by the most since the first commercial well was drilled in 1859, shattering a belief that Americans were increasingly hooked on foreign crude.
The data published by government yesterday are further confirmations that the United States will depend far less on oil imports from countries like Nigeria, helped by reports showing that domestic output grew by a record 766,000 barrels a day to the highest level in 15 years Bloomberg reported.
Net petroleum imports have fallen by more than 38 percent since the 2005 peak and now account for 41 percent of demand, down from 60 percent seven years ago, moving the U.S. closer to energy independence than it has been in decades.
The government data give further weight to projections the nation was on pace to surpass Saudi Arabia as the world’s largest producer by 2020.
Seven years after President George W. Bush declared “America is addicted to oil, much of which is imported from unstable parts of the world,” the country has so much crude that it was able to join Europe in choking off exports from Iran without pushing U.S. benchmark prices over $100 a barrel. And refining capacity helped make the U.S. the world’s largest fuel supplier. Even in Venezuela, where Exxon Mobil Corp. (XOM)’s assets were seized, more and more cars run on gasoline made in America.
“The U.S. has a huge lead in the 21st century in maintaining its superpower status,” said Ed Morse, global head of commodities research at Citigroup Inc. in New York. “There was absolutely no way to anticipate the level of growth in the oil supply.”
America’s latest oil rush was spurred by new technology that has made drilling faster, cheaper and better at unleashing oil from rock formations, even as it has raised alarms among environmentalists about the potential danger to drinking-water supplies and intensifying greenhouse-gas emissions.
Producers, eager to profit from prices that have remained above $75 for more than two years, deployed as many as 1,432 rigs, the most in records going back to 1987. Trucks bearing pipe traversed Wyoming’s high desert plains and Oklahoma’s back highways, geologists pored over well logs from Colorado to New Mexico, and landmen trying to secure mineral rights crowded into courthouse record rooms from North Dakota to the Gulf Coast.
The U.S. will produce an average of 6.41 million barrels a day this year, a 14 percent increase from 2011, according to a December 11 report from the Department of Energy. It’s the biggest annual gain in the number of barrels since the industry began when Pennsylvania’s Drake well ignited the first American oil rush in 1859, department data show. Saudi Arabia pumped 9.7 million barrels a day in November, according to data compiled by Bloomberg. The Paris-based International Energy Agency said last month the U.S. is on track to become the top producer in about eight years.
“The shale oil revolution is a new, new thing,” said Francisco Blanch, the head of commodities research for Bank of America Merrill Lynch in New York. “It has come out of nowhere in the last year and a half.”
The US stockpiles increased by a record 13 percent this year, and U.S. refiners are paying less for crude than much of the rest of the world. Landlocked by export restrictions and limited transportation, the glut of U.S. light, sweet crude -- cheaper to process than the high-sulfur, sour grades pumped by Saudi Arabia and Venezuela -- pushed domestic prices down to as much as $28 a barrel less than Brent, the European blend that sets prices for more than half the globe’s oil.
That discount handed Gulf Coast refiners an advantage over competitors and helped the U.S. become a net fuel exporter last year, for the first time since 1949, surpassing Russia as the world’s largest. Venezuela quintupled its imports from the U.S. this year to a record 196,000 barrels a day in September, according to Energy Department data.
Rising output from the U.S. has also increased the nation’s sway in the global market by forcing the Organisation of Petroleum Exporting Countries into an unpalatable choice: Increase production to bring prices down and maintain market share; or keep prices high to sustain state spending, and thereby subsidise the competition from U.S. producers, which can provide crude to domestic refineries at a lower price.
The unprecedented gains came so quickly that the industry is rushing to regroup. The 500-mile Seaway pipeline, which was reversed last year and now carries U.S. crude south to Gulf Coast refineries instead of moving imports north, will expand to 400,000 barrels a day as early next year from 150,000 now.