On Tuesday the Energy Department released a report of recent domestic production rates for crude oil. There are a few things that are important to note in this report.
(1) We are currently seeing the highest domestic crude oil production since 1998. In September 2012 the U.S. produced 6.5 million barrels of oil per day, the highest it has been since 1998. This production level is the culmination of an increase in domestic oil production since September 2011.
(2) There are 2 Key State Players at the Head of this Race: Texas and North Dakota. In the September 2011 to September 2012 period Texas increased production by 500,000 barrels per day and North Dakota increased by 250,000 barrels per day.
(3) This increase in production is primarily from On-Shore oil production. Both the Texas and North Dakota increases have been a result of new techniques of oil extraction from rocks combining horizontal drilling with hydraulic fracturing, allowing for easier access to more difficult sources of oil.
In addition to the domestic crude oil production data, the U.S. held out another 20 million acres for lease sale in the Gulf of Mexico for oil production purposes. In the end they sold 652,522 acres for production. The most recent sale is a part of the President’s “all of the above” energy policy, and will in time add to our current production rates.
Based on these two reports and an article in the N.Y. Times discussing oil production in the U.S., the U.S. is clearly on a trajectory to be one of the, if not the, largest oil producer in the world. Groups such as the International Energy Agency are forecasting that American oil production is quickly on the rise and set on a trajectory to reach peak production levels from the 1970’s, while our actual consumption is actually on the decline. We are currently on a trajectory to reach our lowest consumption levels since the 1960’s by 2035.
Whether this decline in consumption followed by subsequent rise in production is a product of current oil and gasoline prices on the market is yet to be seen. It will be interesting to watch how these numbers continue to pan out over time and if we see a subsequent reduction in energy costs with the rise in production. Also, broader changes in the US economy are likely to have some impact on all of these numbers.
Thanks to reader April from the DoE for the post suggestion!