Is The US Overtaking Russia as World's Biggest Oil and Gas Producer?
Originally projected to the world’s biggest producer of oil and gas in 2014, the United States surpassed Russia and Saudi Arabia in production in mid-October 2013, ahead of the estimated schedule. According to the International Energy Agency (IEA), the U.S. passed Russia in oil production for the first time since 1982, with an average output of over 10 million barrels per day, a 3.2 million barrels a day increase since 2009.
This oil production growth is the fastest over a four-year period since Saudi Arabia’s 1970-1974 output increase. The U.S.’s surge to the top of the oil producer’s list will affect the global energy landscape as well as affect domestic economy and international politics.
How did US become the world’s biggest producer of oil and gas?
The increase in the United States energy production is mostly due to advanced oil extraction techniques like “fracking,’” which allows energy producers to extract oil and natural gas from shale-rock formations. Only recent technology has allowed this type of production. Even though fracking was introduced in 1949, large scale extraction would have been considered near impossible as recently as a decade ago.
Shale oil makes up 43 percent of oil and 67 percent of the current natural gas production in the United States. As of 2013, at least two million oil and gas wells in the U.S. used fracking to extract oil and natural gas. This process has boosted U.S. oil and gas supplies by one million barrels per day in 2012, and another one million barrels per day in 2013. As a result of this successful technique, the U.S. now produces 14 percent more of its own energy than it did in 2005.
It is due, in part to this fracking oil production that the U.S. has been able to surpass Russia’s production levels. Russia has not yet embraced this type of technology and has been struggling to maintain its energy output.
What this means for the U.S.
The United States is the largest consumer of fuel, and had been one of the biggest importers of oil and natural gas to ensure supply meet demand. However, now with the rise of domestic production, the U.S. no longer needs to rely as heavily on other countries’ natural resources. In the past five years, the import of natural gas and crude oil has fallen from 32 percent to 15 percent, which helped narrow the U.S. trade deficit. This year, China surpassed the U.S. as the largest importer of crude, partly due to the United States decline in importing oil and natural gas.
For the economy, the rising oil supplies helps decrease the cost of oil and oil products domestically, which can help boost economic growth.
U.S.’ oil and natural gas production is expected to continue to outpace the other top producers, Saudi Arabia and Russia, through 2020, and maintain the top spot through 2030.
What this means for other countries that rely on US for import or export of gas?
The top 10 oil suppliers and exporters in the world, outside of the United States, Russia, and Saudi Arabia are China, Canada, United Arab Emirates, Iran, Iraq, Kuwait, and Mexico.
The U.S. has long been one of the largest consumers of energy, and the recent decrease in buying overseas’ fuel has made more fuel available for other buyers. The increase in supply and drop in demand, weakens the power of countries that rely on selling those natural resources for economic and political strength.
For example, the political relationship between Saudi Arabia and United States has long rested on Saudi Arabia’s oil production and its impact on the world oil market, and as a major resource of energy for the United States. The increasing self-reliance and availability of domestic crude, will reduce Saudi influence on cost of gas in the U.S. and in political areas, as people are less inclined to provide costly military assistance for a country that no longer holds sway over their energy needs.
The United States new dominance as a major crude oil and natural gas producer (and exporter of refined oil products) shifts power in the energy trade, driving down domestic gas and oil prices, while reducing the clout of overseas’ producers. With the production growth projected to stay on pace through 2020, the United States is poised to gain even more power in the international arena.
Dave Landry Jr. is a finance and economics consultant who has been blogging for the past three years. He also frequently contributes to National Debt Relief.com, where the masses go for assistance in times of financial difficulty.