The Amazing Story of America's Coming Energy Independence

The U.S. is quickly approaching energy independence, something that seemed unimaginable just a few years ago.

Aug 2, 2014 at 1:17PM

Dependence on foreign oil has long been an economic and political concern for the U.S., but over the past decade, the country has quickly reduced that reliance as domestic drilling exploded and consumers began using less fuel.

By late next year, the U.S. will begin exporting a significant amount of natural gas, something it has imported until recently. By 2016, the country should be a net exporter of natural gas.  

The major energy problem has always been oil, where Saudi Arabia, Iraq, Venezuela, Columbia, and Russia are some of our biggest suppliers.  

So, just how close is the U.S. from being independent of the rest of the world's oil? Energy independence may not be as far away as it seems.

Where has our dependence on foreign oil gone?
U.S. net imports of crude oil and petroleum products have dropped a whopping 58% from late in 2005, when net imports peaked at 13.59 million barrels per day. What's incredible is that the pace of decline hasn't slowed in recent years, but instead picked up steam slightly, as you can see below.  

Us Net Imports With Trendline

Source: U.S. Energy Information Administration.

What's surprising is that it's not just an increase in oil drilling that's caused the decline in imports. Declining demand has played a big role as well.

The boom in energy production
It's well known that new drilling techniques in shale deep beneath the earth's surface have been responsible for most of the increased oil production in the U.S., but just how fast production has increased is incredible.  

Below is a chart of the crude oil production in Texas and North Dakota, two states that accounted for 48.5% of the oil production in the U.S. in May, according to the U.S. Energy Information Administration.

Chart

Source: U.S. Energy Information Administration.

You can see that the trends are showing no signs of slowing, either. Oil and gas companies are focusing their efforts on oil-rich fields right now, and production should continue to grow, especially in Texas and North Dakota where the Eagle Ford, Barnett, and Bakken plays continue to show increasing potential.

Declining consumption helps the cause
While increased oil production is great, it doesn't mean a lot to imports if consumption is rising as well. The good news is that consumption is falling, and that's helped reduce imports even further.  

Chart

Source: U.S. Energy Information Administration.

There are a few things driving the reduction in oil consumption. First, people are simply driving less as a result of urbanization and the simple desire to save money. But when they are driving, they're driving more efficient cars.

SUVs that were very popular during the 2000s have seen sales decline in favor of hybrids and even electric vehicles. New CAFE standards were put in place in 2012 that will require automakers to reach a fleet fuel efficiency of 54.5 miles per gallon by 2025, and the technology to make that happen is already being put into vehicles.  

These factors will at least keep a cap on consumption growth long term, if not reduce consumption overall. That's key if the U.S. is ever going to be truly energy independent.

When will the U.S. be energy independent?
Within the next few years, the U.S. will be a major natural gas exporter, so the big concern for energy independence is oil.

If the current rate of net import decline continues, the U.S. will be energy independent around 2020 and could even become a net exporter by then. That's an amazing turnaround from importing a net 12.5 million barrels of oil per day in 2005.

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