The still-young but fast-growing US energy boom is closing in on a big milestone. Thanks to shale, domestic oil production is about to overtake oil imports. CNBC reports:
Andrew Lipow of Lipow Oil Associates expects the government data to show that U.S. production actually surpassed imports in March, when it releases its final March data at the end of the month. [...]
The Energy Information Administration said Wednesday in its Short-Term Outlook that U.S. oil production averaged 7.1 million barrels per day in the first quarter, and that should rise to 8.5 million barrels per day by the fourth quarter of 2014.
It expects average production of 7.4 million barrels per day in 2013, up from 6.5 million barrels per day in 2012. EIA also said it expects liquid fuel net imports, including crude and petroleum products to keep falling, from 7.4 million barrels per day in 2012 to 5.7 million barrels per day by 2014.
This is excellent news for the US. Greater domestic production is a boon to the economy, and fewer imports gives us more flexibility when dealing with the world’s petrostates. (But as Gal Luft and Anne Korin wrote for The American Interest last July, to speak of true “energy independence” is folly.)
Even if North America becomes completely oil self-sufficient—a possibility if you count Canada’s oil supplies in the equation as well—the continent will still be vulnerable to international oil price spikes. That’s because oil is a globally-traded commodity, and a very liquid one at that. The US has gone out of its way to break down the barriers to global oil trade over the past few decades to ensure a robust, multipolar supply chain. The result is that the price of oil drilled in the US is tied to the price of oil abroad. That’s partly why gas prices aren’t coming down as domestic production rises. It’s also why we can’t expect to be able to completely write off troubled or troubling oil-rich regions.
Even if we took the drastic step of insulating ourselves from the global oil market at some point down the road, we would still have to consider the oil needs of our allies. For better or for worse, our energy supply is tied up with the world’s petrostates. That won’t change until we stop consuming oil—an unlikely outcome in the near future.
Having said all that, this is still news to celebrate. It gives the US more flexibility in its Middle East policies and brings the country a new wave of wealth and jobs. That’s yet another reason to be optimistic about America’s future in this still-young century.
[Oil rig image courtesy of Shutterstock]