U.S. Awash in Oil Production
A great example of what can happen when lawmakers blow the cap off unnecessary regulations and allow innovation to mold the market.
A few years ago the Mercatus Center published a shortlist of “The 10 Most-Regulated Industries of 2014.” At the top of the list stood petroleum and coal products manufacturing. Also included on the index was oil and gas extraction. As the authors pointed out, “Heavy regulation reduces entrepreneurship and employment opportunities and can divert investment from the most productive uses.” Well, today we have a great example of what can happen when lawmakers blow the cap off unnecessary regulations and allow innovation to mold the market.
This week the Energy Information Administration (EIA) announced a monolithic number — 10 million. That’s the current number of oil-brimmed barrels that the U.S. produces each and every day. It’s been nearly five decades — 1970 — since U.S. production reached this magnitude. According to the EIA, “U.S. crude oil production has increased significantly over the past 10 years, driven mainly by production from tighter rock formations including shale and other fine-grained rock using horizontal drilling and hydraulic fracturing to improve efficiency.”
Drilling has long been criticized by leftists, both because of its alleged detrimental effects on the environment and its supposed lack of sustainability. The evidence puts both of these narratives to rest. For starters, carbon dioxide emissions here in the states aren’t rising. That’s largely thanks to the boom in natural gas that’s being derived from fracking — another extraction procedure the Left despises. Secondly, for decades leftists have said that oil extraction can’t be maintained. Yet exploration and innovation keep proving them wrong.
All of this benefits the economy big time. U.S. imports have fallen from 12.9 million barrels a day in 2006 to just 2.5 million now. And as The Wall Street Journal notes, “This translates into greater energy security as the U.S. is less dependent on foreign oil sources.” That’s because the ban on oil exports was finally rendered null and void in 2015. As of November, 1.5 million barrels were being shipped out of the U.S. every day. So not only has innovation spurred a production bonanza, but that production is now free to be marketed outside the U.S.
Importantly, this trend is also sustainable. How so? The Journal explains: “Also striking is how quickly the oil and gas industry has recovered from the oil price plunge of 2015-2016. Previous price declines led to multiple bankruptcies and bank failures. This time drillers adapted quickly, took the rig count down fast, and cut costs. America’s flexible private capital markets helped the companies ride out the price trough, and now producers, investors and lenders are reaping the benefits of the oil price rebound to $69 a barrel.” In other words, companies now have a better idea of how to navigate fluctuating prices. This makes it harder for outside forces to trap American oil producers. Of course, that’s all assuming regulators keep their hands off this booming market.