The financial crisis of 2008 cast a long shadow over the U.S. energy landscape, leading many to fear an unyielding energy crisis. U.S. oil production, which had peaked at approximately 9.6 million barrels per day in 1970, saw a steady decline over the ensuing decades.
This downward trend was compounded by a growing dependence on oil from the Middle East, placing the U.S. in a precarious geopolitical situation. The need for military intervention to secure energy sources became increasingly necessary, raising concerns about the sustainability of foreign oil dependence.
However, an unforeseen twist occurred. After plummeting to around 5 million barrels per day in 2008, U.S. oil production unexpectedly rebounded. Instead of continuing to decline, production levels began to rise.
According to the International Energy Agency (IEA), domestic crude production peaked at 7.8 million barrels per day for the week ending October 18—the highest figure in nearly 25 years. This remarkable turnaround and its implications are nothing short of astounding. In fact, the World Energy Outlook 2013 projected that by 2015, the U.S. would overtake Saudi Arabia and Russia as the world’s leading oil producer.
This forecast came two years ahead of the IEA’s previous estimate of 2017. What is the reason behind this impressive achievement?
Two Chapters in the Oil Markets
The remarkable turnaround in U.S. oil production is largely due to the shale boom. Just a few years ago, extracting oil from shale was regarded as impractical, with major oil and gas companies dismissing it as a mere fantasy.
However, that perception changed when pioneers like George Mitchell and other unconventional wildcatters made significant strides in innovative drilling techniques. These advancements include hydraulic fracturing—commonly known as fracking—and horizontal drilling, which allow access to vast reserves of previously unreachable oil and gas.
“Shale oil is a significant opportunity for both the United States and the world,” noted IEA Chief Economist Faith Birol. Yet, Birol expresses some caution regarding the long-term outlook for shale production.
“We foresee two distinct phases in the oil markets,” Birol explained in a Reuters interview. “From now until 2020, we anticipate a surge in light, tight oil [shale oil] production. However, due to the limited resources available, we expect this to plateau and ultimately decline. Following 2020, Middle Eastern oil is likely to dominate again.”
In contrast, at Economic Prism, we are optimistic about shale production. The innovative technologies will likely reveal additional shale formations viable for extraction. This trend is just beginning to escalate.
Buck Butler’s Doggone Miracle
Nevertheless, the time to take advantage of opportunities is when they arise. Buck Butler exemplifies this approach.
A few years ago, Buck found himself in dire need of a miracle. The 83-year-old rancher from South Texas had invested all his savings in land over the years. Despite his relentless work with thousands of cattle, his ranch operation was struggling to stay afloat.
By 2009, Buck had amassed debts exceeding $3 million to various lenders, leaving him with barely a penny to his name. His situation became increasingly dire as bankruptcy loomed on the horizon. But just when all hope seemed lost…
…a remarkable change took place.
Some moments in life bring together luck and opportunity in a perfect storm. For Buck, this unexpected intersection couldn’t have been more fortuitous or timely. The impact was nothing short of transformational.
With the introduction of fracking, Buck’s once marginal ranch land was now prime for oil production. More importantly, his life was irrevocably altered in the best possible way, a fate shared by many others.
Sincerely,
MN Gordon
for Economic Prism
