Five charts that help put ‘Saudi America’s’ shale revolution into perspective
1. The Department of Energy reported yesterday that US oil production for the week ending August 30 averaged 7.62 million barrels per day (bpd), which is the highest weekly output of crude oil in the US since October 1989 (see chart above). Over just the last two years since August 2011, US oil output has increased by 2 million bpd. That increase is almost exclusively because of increases in domestic shale oil production in states like North Dakota and Texas, and that shale oil surge has completely reversed a multi-decade decline in US oil output and brought domestic crude oil production to the highest level in almost 24 years.
2. The Energy Information Administration (EIA) released new data this week on international energy production for the month of May. For the seventh consecutive month starting last November, “Saudi America” was again the No. 1 petroleum producer in the world in May, and the US produced more petroleum products (crude oil and other petroleum products like natural gas plant liquids, leased condensate, and refined petroleum products) at 12.06 million barrels per day (bpd) than No. 2 Saudi Arabia at 11.53 million bpd (see chart above). Starting in around 2009, revolutionary drilling technologies started accessing oceans of shale resources in America, which launched the US to become the world’s No. 1 petroleum producer by the end of 2012.
3. Mostly as a result of increased production of domestic shale oil and gas, America produced more than 90% of all energy consumed during the month of May according to data released recently by the EIA. The last time the US was more than 90% “energy self-sufficient” in any single month was in September 1987, almost 26 years ago (see chart above).
4. Thanks to the abundance of domestic shale gas resources that have recently become available because of advanced drilling technologies (hydraulic fracturing and horizontal drilling), natural gas prices have fallen to historic low levels. The chart above shows natural gas prices adjusted to the energy equivalent of one barrel of oil based on a price ratio of 5.8-to-1 (one barrel of crude oil has 5.8 times as much energy content as one million BTUs of natural gas), on a monthly basis back to January 1994. For example, at the current price of $3.43 for one million BTUs of natural gas, gas would cost $19.89 for an amount of energy equivalent to one barrel of oil, which is currently priced at $108.67 per barrel.
5. The chart below shows the monthly percentage difference between the price of natural gas and crude oil, on an energy equivalent basis, back to January 1994. Thanks to the abundance of shale gas, natural gas is currently almost 82% cheaper than oil, adjusted for energy equivalence. The increased affordability of natural gas at historic levels, especially when compared to the price of oil, has provided significant economic and environmental benefits to the US economy including: a) lower energy costs for residential, commercial and industrial consumers that have generated billions of dollars in savings, b) increased competitiveness for energy-intensive US manufacturing that has contributed to an American manufacturing renaissance, and c) a reduction in CO2 emissions to an 18-year low in 2012 for total emissions, and to almost a 50-year low on a per-capita basis.
Bottom Line: The five charts above provide graphical evidence that America’s shale energy revolution is taking us from “resource scarcity” to a new era of “resource abundance” as the US was able to produce 90% of its own energy in May and has produced more petroleum products than Saudi Arabia in every month since last November. This energy bonanza in the US — described as the “energy equivalent of the Berlin Wall coming down” — would have been largely unthinkable even five years ago. But then thanks to revolutionary drilling techniques developed by America’s “petropreneurs,” we’ve unlocked vast oceans of shale oil and gas across the US and are now the world’s No. 1 producer of petroleum for seven months running. Welcome to America’s amazing shale revolution.