American innovation has delivered a conclusive victory in one of the most significant economic battles of our time: the war against international oil price gouging. For much of the past 45 years, just a hint or rumor of the Organization of Petroleum Exporting Countries cutting back oil production was sufficient to send oil prices soaring and U.S. consumers searching for cover.
OPEC’s power was once so strong that then-President Jimmy Carter proposed gasoline rationing in the late 1970s. Middle Eastern oil producers could hold the U.S. economy hostage by threatening production cuts in response to American foreign policy decisions. America and the world monitored every OPEC meeting with bated breath. From 1970 to 2008, U.S. oil production fell by nearly 50%. As a result, we became even more dependent on and vulnerable to OPEC production decisions.
But those days are over, and good riddance.
The situation began to change in 2008, when advances in directional drilling and hydraulic fracturing, commonly called “fracking,” technologies unlocked oil and natural gas resources that had been too difficult and too expensive to recover. After a decade of increasing production, U.S. energy producers in 2018 finally topped our previous record production that occurred in 1970.
Most of the production increases during the past decade occurred on private and state-owned lands, as the Obama administration actively stifled energy production on federal lands. The Trump administration, however, has undone many of the Obama-era restrictions, significantly adding to the increase in American oil production. Final data from 2018 will likely show a 20% increase in oil production compared to 2016, the last year of the Obama administration.
OPEC Nightmare: More U.S. Oil
And the news keeps getting better. In late 2018, the U.S. Geological Survey, still one of our most trusted federal science agencies, reported that the huge Permian Basin oil play in Texas and New Mexico contains twice as much petroleum as the agency’s largest previous assessment. The Permian is now believed to be the center of the oil and natural gas extraction world.
Former Secretary of the Interior Ryan Zinke said the revised assessment of Permian Basin oil resources was an early Christmas present for the energy sector and the American people: “Before this assessment came down I was bullish on oil and gas production in the United States, now I know for a fact that American energy dominance is within our grasp as a nation.”
With a strong assist from Permian Basin production, America during the final week of November became a net oil exporter for the first time since the federal government began keeping records 75 years ago. America’s growing oil production — coupled with America’s prodigious natural gas and coal exports — is fulfilling President Donald Trump’s pledge to transform the nation into the world’s dominant energy power.
Further, Acting Secretary of the U.S. Environmental Protection Agency Andrew Wheeler recently announced a reversal of stifling regulations on the oil and gas industry installed by the Obama administration. Wheeler said “removing these excessive regulatory costs will generate roughly $484 million in cost savings and support increased domestic energy production.” The new rules also empower the states to work more closely with the federal government in regulating the oil industry.
No More Price Gouging
It has been a half-century since the 15 member countries of OPEC set production quotas to dominate oil markets. In 2015, they flooded the market with oil in hopes of defeating U.S. shale drillers driving oil prices down. American companies fought back with improved methodology that made profits possible at lower oil prices.
Over the past five years, production per rig has more than tripled in the Permian Basin and quadrupled in North Dakota’s Bakken Shale.
U.S. producers say they can turn a profit at $50 per barrel, and some can earn a profit at prices as low as $30. At the same time, most OPEC members need prices between $70 and $90 to balance their budgets. They are in serious trouble, so they have once again turned to numerous collusive strategies to win the market, all of which are failing.
The bottom line, plain and simple, is that we have won the war against OPEC price gouging. Thanks to American innovation and the welcome assistance of the Trump administration, U.S. consumers no longer need to fear foreign oil oligarchs.
[Originally Published at Investor’s Business Daily]
Jay Lehr was an internationally renowned speaker, scientist, Senior Policy Advisor with the International Climate Science Coalition and Senior Science Analyst at CFACT.
Tom Harris is executive director of the International Climate Science Coalition
