The meteoric rise in Texas oil production over the last few years has to be one of the most remarkable energy success stories in US history – oil output in the Lone Star State has nearly doubled in only two years (see chart above). As I reported yesterday, if Texas was a separate country, it would now be the 10th largest oil-producing nation in the world based on crude oil production data for May. Much of the increase in Texas oil production has taken place primarily in two oil fields: a) the Eagle Ford Shale in South Central Texas, extending southwest from San Antonio, and b) the Permian Basin in West Texas centered in the Midland-Odessa area. Two recent reports highlight the Texas oil boom in those two “star players of the nation’s shale boom.”
1. “The Eagle Ford Shale Turns Five” (by David Blackmon):
Five years of hindsight enables us to look back and truly understand what a portentous turning-point month October 2008 was for the United States. In that month, the following critical economic events took place:
The Bad News:
• Oct. 3 — President George W. Bush signs the $700 billion bailout bill for the U.S. financial system.
• Oct. 6 — The Dow Jones Industrial Average falls by as much as 800.06 points, its biggest intraday drop on record. The Dow closed below the 10,000 mark for the first time since Oct. 26, 2004.
• Oct. 24 — “Bloody Friday” saw many of the world’s stock exchanges experienced the worst declines in their history, with drops of around 10 percent in most indices.
The Good News:
• Petrohawk completes the first successful well in the Eagle Ford Shale.
Without that final piece of good news, and the subsequent discovery of other massive new oil and gas shale plays around the country, October 2008 may well have turned out to have become the kickoff month of a second Great Depression.
That’s because the numbers clearly show that the oil and natural gas industry, thanks to the much-vilified fracking technique that has enabled the unlocking of this vast new resource, has been the main positive driver of the U.S. economy for half a decade now.
Since 2008, and especially over the last 3 years, since development really began to ramp up, the Eagle Ford Shale has been the star player in this nation’s shale revolution, and will likely continue in that role for years to come.
The most reliable projections indicate that the Eagle Ford will soon surpass the Bakken Shale in North Dakota to become the largest oil producing field in the lower 48 states.
Back in 2008, Midland, Texas, Mayor Wes Perry knew his town was about to take off. The city of nearly 150,000 in west Texas sits atop the Permian Basin, one of North America’s largest oil reserves. For decades, much of the oil remained untouched, contained in rock formations buried deep beneath the surface. But then Perry, an oilman himself, says he starting hearing how experiments using hydraulic fracturing had proved promising.
“When people figured out how to [produce oil] through fracking, that was the game changer,” he said.
Since then, Midland has transformed itself into the nation’s fastest booming metro area, ranking at or near the top of the list of every major measure of recent economic and population growth. The latest census estimates reported Midland’s population swelled 4.6 percent in only a year, topping all other metro areas. Its economy similarly expanded payrolls by 6.2 percent over the past 12 months, the second largest gain nationwide.
From 2009 to 2011 (the most recent data available), Midland’s personal income per capita jumped a staggering 25 percent – more than any other metro area, according to the U.S. Bureau of Economic Analysis. It increased 12 percent between 2010 and 2011, second only to Odessa.
Bottom Line: It’s hard to overestimate the importance of the shale revolution to the US economy over the last five years. And the timing couldn’t have been better – the shale revolution started around 2008, just as the US economy was being crippled by the financial crisis, mortgage meltdown, housing crash and the Great Recession, as David Blackmon points out. At a very critical period for the US economy, we started successfully drilling for unconventional natural gas in the Marcellus region of Pennsylvania, and for unconventional shale oil in places like the Bakken in North Dakota and the Eagle Ford Shale and Permian Basin in Texas.
Shale energy started revitalizing a very weak US economy in 2008 and delivered a powerful economic stimulus with increased investment activity and thousands of shovel-ready jobs. It’s quite sobering to imagine where the US economy would be today without the huge economic impact from the energy revolution over the last five years in places like Eagle Ford and the Permian Basin, but it’s safe to say that the nation’s jobless rate would likely be much higher and economic growth would be much slower.