According to the Energy Information Administration, the United States in April produced 13.63 million barrels per day, or BPD, of oil and natural gas liquids. This was 2 million BPD more than Saudi Arabia -- the largest difference ever recorded between the two nations. To understand just how remarkable that is, consider this: Prior to 2008 Saudi Arabia routinely beat America by 2 million to 3 million BPD per month. Only a 67% increase in U.S. oil production since 2008 has allowed the complete reversal of this relationship.
This energy miracle has been made possible by the shale oil and gas booms from states such as Texas and North Dakota, which saw their respective production levels soar 119% and 177% from 2010 to 2013.
Thanks to the shale revolution, economic activity in states such as Texas, Colorado, Oklahoma, West Virginia, Wyoming, and North Dakota are taking off. For example, while the American economy grew just 1.9% in 2013, Texas' expanded by 3.6% thanks to its fast-growing $200 billion mining sector, which encompasses oil. In fact, the oil boom helped Texas achieve the second-largest economy of any state at $1.5 trillion.
Meanwhile, Colorado's oil and gas sectors grew by 89% and 38%, respectively, between 2007 and 2012 and helped fuel the state's 3.8% growth last year.
North Dakota, though, remains the absolute state pinnacle of black gold success. In 2013, the state's economy grew at 9.7%, yet only 3.6% of that was directly due to oil production. Most was related to construction and real estate booms needed to support the nation's fastest-growing population. North Dakota has the hyper-prolific Bakken shale formation (where production is up 20-fold in the last six years) to thank for a 2.9% unemployment rate, the lowest in the nation.
Oil taxes have helped North Dakota achieve a 6.7% budget surplus. Meanwhile, Texas' budget surplus stands at $2.6 billion, and its rainy day fund has swelled to $8 billion.
Let the good times roll
The EIA estimates that U.S. oil production (excluding natural gas liquids, or NGLs) will increase 13.6% to 9.5 million BPD in 2016, a peak that will hold through 2020 before a gradual taper begins. However, thanks to continued advances in technologies such as hydraulic fracturing, horizontal drilling, and enhanced oil recovery, Pioneer Natural Resources CEO Scott Sheffield believes U.S. oil production might actually double from 2013 levels.
Indeed, from the beginning of the shale revolution people have called the American oil boom unsustainable. Yet the larger it grows, and the longer it lasts, the more technological innovations tend to increase production and reserve estimates. One example of such a trend is enhanced oil recovery.
Enhanced oil recovery, or EOR, is an especially exciting area, because it both helps increase oil production and offers environmental benefits. Specifically, CO2 injection into oil wells increases pressure and lowers oil viscosity, resulting in up to three times greater oil recovery from shale formations. Much of the CO2 remains trapped underground where it won't contribute to climate change.
Another form of EOR is water flooding, which is expected to increase oil reservoir recovery rates by 20%.
To understand just how big a deal that is, consider this: For every 1% increase in oil recovery the world gains up to 88 billion barrels of additional oil reserves, which is enough oil to supply the world for three years.
The boom is here to stay
People who think America's oil boom will prove to be short lived fail to realize that the United States has some of the largest shale formations in the world. For example, the Permian Basin, where reserve estimates are up 50% in just the last year alone, is larger than Saudi Arabia's Ghawar super-giant oil field.
The EIA estimates the U.S. has 223 billion barrels of technically recoverable shale oil, but that figure is likely to greatly increase. This is because the last time the EIA's world shale report was updated between 2011 and 2013, its global estimate for technically recoverable reserves increased 11-fold.
If history is any guide those reserve estimates will continue to grow as long as sufficient capital is available to fund the necessary infrastructure and technological improvements to drill deeper and extract more efficiently. And when it comes to investments in US energy, the boom is just getting started.
Consultancy firm IHS estimates that $890 billion will be invested into the U.S. energy sector through 2026. Analyst firm McKinsey estimates that this mammoth investment will result in 1.7 million new, high-paying jobs by 2020 alone.
What American energy dominance means for the world
Thanks to chaos in the Middle East and sanctions against Iran, 4% of the world's oil supplies are offline.
If sanctions against Russia over the conflict in Ukraine escalate, even more of the world's oil could become unavailable, theoretically resulting in a large price shock that could derail global economic growth. Yet despite turmoil around the world, oil prices are at 13-month lows; analysts at Goldman Sachs expect them to remain stable over the next year thanks to America's production boom replacing oil from less stable areas of the world.
Before 2008 and the onset of the modern unconventional oil boom, people spoke in worried tones of peak oil and an age of resource scarcity. Today the world faces a new reality -- one of American energy dominance that replaces Saudi Arabia and the volatile Middle East in importance and brings the promise of more stable energy prices, scores of new high-quality jobs, and increased world stability.