Oil rigs and a flare are visible at this Hess production site in North Dakota.
The International Energy Agency made headlines Monday when it declared in its World Energy Outlook 2017 that the U.S. could be a net exporter of oil within a decade. The IEA also projected that the U.S. is set to become the world’s dominant oil and gas production leader for decades.
Is that a realistic assessment? Is the U.S. on the cusp of achieving energy independence for the first time in nearly 70 years?
A dozen years ago, the notion that the U.S. could achieve energy independence would have drawn scoffs from most energy analysts (including myself). After all, U.S. oil production had been in decline since reaching a peak of 9.6 million barrels per day (BPD) in 1970. By 2005, U.S. oil production had fallen to 5.2 million barrels per day.
But U.S oil demand continued to grow, so crude oil imports soared as crude oil production declined. By 2005 net imports of crude oil and finished products like gasoline had reached a record 12.5 million BPD.
U.S. energy security hit an all-time low in 2005, but the situation has changed dramatically since then. Oil and gas drillers had been experimenting with combining hydraulic fracturing with horizontal drilling, and their success ushered in the shale oil and gas boom.
Natural gas production turned upward in 2006 and would rise by 50% over the next decade. Oil production followed in 2009 and added more than 4 million BDP of new production by 2015.
Meanwhile, U.S. crude oil demand, which had exceeded 20 million BPD from 2003 to 2007, ultimately softened in response to rising oil prices. Demand began to decline in 2008, and within five years had fallen by 2 million BPD.
The combination of surging supplies and slumping demand caused U.S. oil imports to begin falling. The new oil supplies from the U.S. shale plays proved to be a bonanza for U.S. refiners, which processed the oil and began to export some of the finished products.