decade ago, it was believed that wells that had been hydraulically fractured would have a short life span, that the oil and gas industry would need to keep drilling to keep output up, and that the oil and gas boom would dissipate fairly quickly. But, recent data show that not to be the case. Production is still increasing despite a slowing in oil and gas rig growth, which indicates that the early skeptics who thought this was a temporary production boom requiring numerous new wells to keep output up were wrong. Rather than drilling in new shale formations, oil and gas producers are finding ways to get more out of the formations they have already found.
Through the use of hydraulic fracturing, the United States has become the world’s largest oil and gas producer, keeping natural-gas prices low for U.S. consumers, and keeping crude oil prices in check around the world. Without the U.S. oil production boom, it is predicted that oil prices would be around $150 a barrel, rather than $100 per barrel. If this estimate is correct, the United States is saving the global economy about $4.9 billion a day in oil spending.[ii]
Source: Wall Street Journal,
North American Oil Production Makes Up for World Market Disruptions
It is estimated that without the additional supply from the United States, the world oil market would be about 3 million barrels short of the over 90 million barrels of oil it currently demands. That shortage would drive up the price of oil to well over $100 per barrel.
Since 2011, U.S. oil production has increased by almost 3 million barrels a day, with total production at 8.5 million barrels in July 2014, due to hydraulic fracturing and directional drilling in shale oil fields. That is less than the volume of oil production that has been disrupted in world markets from the Arab Spring and follow-on uprisings, the chaos in Nigeria, Iran sanctions, Russia’s invasion of Ukraine, and unrest in Iraq. About 3.5 million barrels of oil a day have been off the market since last fall. The increase in U.S. oil production coupled with the increase in Canadian oil production of around 1 million barrels per day has made up for these oil disruptions.[iii]
Drilling Productivity Continues to Increase
According to the Energy Information Administration (EIA), the number of rigs drilling in the United States is basically flat, but production continues to increase, and this drilling productivity shows no sign of slowing. U.S. production of tight oil, of which shale oil is a component, increased from less than 1 million barrels per day in 2010 to more than 3 million barrels per day in the second half of 2013.