In Thanksgiving for Increased Energy Security from Fracking
Thanksgiving is on the horizon, and there’s much to be thankful for, including the fact that fracking has rapidly increased energy security, changing our landscape from one of scarcity (and being overly dependent on OPEC) to one of abundance.
That’s had a huge impact on Americans’ pocketbooks. AAA is reporting that families will be able to visit their relatives this year with gas prices that are the “second-cheapest in nearly a decade.” AAA also estimates that U.S. drivers saved more than $28 billion in 2016 on cheaper gas, thanks to an abundance of resources from domestic production.
What’s more is that U.S. production has remained steadfast even though OPEC has been attempting to drive down prices and drive out shale for the past two years, in order to protect its market share. But the tactic has failed as the U.S. producers have proven themselves to be resourceful and resilient, adopting new technologies and increasing efficiencies. OPEC has signaled that it may end that price war and curb production. What happens next remains to be seen, but regardless, one thing is clear: OPEC is becoming “increasingly irrelevant.” As Gary Bourgeault wrote in a Seeking Alpha piece,
“As OPEC is taking center stage for what will be its last grasp at its past influence on the oil market and price of oil, U.S. shale producers, which are the future of the industry, are quietly but rapidly adding more oil rigs and completing wells.”
“To shale producers, OPEC is increasingly irrelevant. Sure, if the cartel does cut production and provide some temporary support for the price of oil, they’ll enjoy the benefits of a short-term price hike, but they aren’t boosting oil rigs and completing wells for that reason.” (emphasis added)
The UK Telegraph produced the headline, “Opec oil cut nears as battered Saudis bow to indomitable US shale” and reported regarding the deal,
“Yet any breakthrough will come as the U.S. Geological Survey reports vast quantities of cheap shale in the Wolfcamp pocket of the Permian Basin of West Texas, and US president-elect Donald Trump vows to slash costs for drillers and open federal land for exploration.
The Permian alone could rival the giant Ghawar oil field in Saudi Arabia, ultimately producing 6 million b/d at relatively low cost.
OPEC faces a Sisyphean task. It must learn to live with a permanent threat from agile frackers in North America, who are able to crank output within months at ever lower break-even costs, potentially capping global crude prices at half the level of the long boom years, which ended so brutally in 2014. Brent crude nudged up to US $46.80 last week on optimistic talk from OPEC ministers, though prices are still down 15 per cent since early October.” (emphasis added)
Yes we did drill our way to energy security
It wasn’t that long ago when OPEC was able to use its domination of world oil production as a political weapon, resulting in the 1973 energy crisis and long lines at the pump. Even just a few years ago, most experts still thought we were quickly running out of oil – and as President Obama told us repeatedly, “We can’t just drill our way to energy security.”
But then we did – thanks to fracking.
According to the Energy Information Administration (EIA), the United States is at its lowest level of net imports since 1986. We’re now among the top most energy secure countries in the world.
Bloomberg has reported that U.S. shale gas exports are “booming” as we are set to export a record number of cargoes of shale gas this month. Now the tables have turned as the United States has actually began sending liquefied shale gas to Kuwait and the United Arab Emirates, “reversing Middle East dependence” as a recent Forbes column put it.
The USGS has also recently confirmed that we have even more of an abundance of supply than previously thought. The agency just announced the largest ever assessment of undiscovered, technically recoverable oil and gas resources in the Midland Basin of the Wolfcamp Shale area in the Permian Basin. It may hold an estimated 20 billion barrels of continuous oil, 16 trillion cubic feet of associated natural gas and 1.6 billion barrels of natural gas liquids in the region.
Meanwhile USGS found that the Mancos Shale in the Piceance Basin of Colorado holds 66 trillion cubic feet (Tcf) of natural gas, which means it’s the second largest reserve in the nation and could meet the needs of the entire nation for more than two years.
None of this would be possible without fracking. In Thanksgiving for the innovative industry that brings so many benefits, including lower prices and increased energy security, we wish everyone a very safe and happy holiday weekend.