More American Energy = Lower Prices
U.S. consumers are enjoying some welcome relief at the gas pump this fall, providing more evidence of the transformative power of the U.S. shale revolution. Despite global unrest, gasoline prices have continued to decline in recent weeks thanks to a surge in U.S. crude production. USA Today reports, "Nationally, regular grade unleaded is averaging $3.28 a gallon. But some areas of the U.S. are paying just $2.75 as falling post-summer demand, ample global crude oil inventories and surging supplies provide consumers a break heading into the last quarter of the year."
The price of crude oil is by far the largest contributing factor to gasoline prices, and while the price of oil is still set on a global market, U.S. production is stepping up to help meet the world’s energy demands and helping stabilize crude prices in the wake of supply disruptions in the Middle East. U.S. Energy Information Administration (EIA) chief Adam Sieminski explained last month, "If we did not have the growth in North Dakota, in the Eagle Ford and the Permian, oil could be $150 (per barrel)."
"The U.S. is overtaking Saudi Arabia to become the world’s largest producer of liquid petroleum, in a sign of how its booming oil production has reshaped the energy sector," according to a recent report in the Financial Times. "Global crude prices have fallen in the past two years, in spite of the turmoil in Syria and Iraq, fighting in Libya and Russia’s conflict with Ukraine. Brent crude hit its lowest level in more than two years last week at about $95.60 a barrel, down from a peak of over $125 a barrel early in 2012. Over that period, the growth in US production of more than 3.5m b/d has almost equaled the entire increase in world oil supplies."
And the Washington Post’s Steven Mufson recently noted, "Thanks to shale oil drilling largely in North Dakota and Texas, U.S. crude oil production has climbed to 8.5 million barrels a day, its highest level since 1986. Including natural gas liquids, U.S. oil output is nearly even with Saudi Arabia. Production of ‘tight’ oil -- from the fracking of shale -- has gone from a marginal slice of U.S. output to nearly 4 million barrels a day since 2010. North Dakota is producing more than Libya."
The U.S. shale revolution is also helping stabilize the world’s natural gas prices, and American consumers are reaping the greatest benefits. The Wall Street Journal’s Market Watch blog today reports, "Fracking in shale deposits has made the U.S. the world’s leader in natural gas production and helped lower the cost of gas and energy prices for Americans, while prices in Asia and the European Union have risen. In a report accompanying its world economic outlook, the International Monetary Fund laid out the global implications of the U.S. shale boom. In 2000, shale gas accounted for merely 1% of U.S. natural gas production. Today, shale gas production now accounts for about half of the total U.S. natural gas production, according to the IMF. … Despite the disparity in who has benefited from the U.S. shale revolution, it has been able to help stabilize international energy prices. With the disruptions seen in the geopolitical landscape, the increase in shale gas production has helped offset shortages, keeping prices lower than they would have been otherwise."
There is no question America’s shale energy boom is having a real impact on energy prices, and lower energy prices are bringing real benefits to American households. House Energy and Commerce Committee Chairman Fred Upton (R-MI) commented, "Many families across the country are still struggling to fill up at the gas pump and pay their energy bills, but if it were not for America’s continued growth in energy production prices would be even higher. My colleagues and I have long touted increased energy production as a key to greater energy security and lower energy prices, and we are now seeing it play out in real time. By allowing the responsible development of more of our own energy resources, we could see prices go down even further."