As late as the mid-2000s, prominent experts pontificated that the U.S. would remain a major importer of crude oil and natural gas. Domestic energy demand would continue to grow and U.S. oil and gas production would remain in secular decline, they argued.
Fast-forward to today and America's energy landscape is radically different. Domestic hydrocarbon production is at a multidecade high, while imports are at a multidecade low. This reversal in America's energy fortune has come largely from advances in drilling techniques such as horizontal drilling and hydraulic fracturing, along with the daring entrepreneurs who applied them to exploit shale rock formations buried thousands of feet under the Earth's surface.
Surging U.S. crude oil production
This chart from the U.S. Energy Information Administration (EIA) shows the dramatic turnaround in national annual crude oil production since 2008:
After a steady decline that began in the mid-1980s, the nation's crude production has surged over 50% from 5 million barrels per day, or bpd, in 2008 to nearly 7.5 million bpd last year. And it continues to grow at a rapid clip: The latest data from the EIA shows that U.S. crude oil output averaged 8.5 million bpd in July, the highest level since April 1987.
Indeed, the agency has raised its production outlook for this year to 8.5 million bpd, up from a previous estimate of 8.42 million bpd, and for next year to 9.3 million bpd from a previous 9.27 million bpd. If the 2015 forecast pans out, it would represent the highest annual average oil production since 1972.
Falling crude and petroleum product imports
As a result of this rapid growth in oil output, U.S. imports of crude oil and petroleum products have declined to the lowest level since 1996, as the chart below shows:
After reaching a peak of more than 5 million bpd in 2005, crude oil and petroleum product imports fell to just under 3.6 million bpd in 2013. But that doesn't even tell the whole story. Last year, the nation also exported record amounts of gasoline, diesel, and other petroleum products, which resulted in net energy imports plunging to their lowest level in more than two decades.
This allowed the United States to meet 84% of its energy demand through domestic production, a massive improvement from the 65% recorded in 2005. With U.S. energy production growth expected to outpace demand growth over the next few years, the nation should continue to become less energy dependent, at least until shale production peaks.
In an era marked by anemic economic growth, an increasingly polarized political system, and widening economic inequality, the U.S. shale revolution has been a true game changer. It has helped cut the nation's net energy imports to the lowest level in over two decades and reduced its reliance on foreign energy. This has, in turn, contributed to a major improvement in the U.S. trade balance.
The shale boom has also created millions of direct and indirect jobs, boosted tax revenues for hydrocarbon-rich states, and played a central role in reviving the manufacturing sector and other energy-intensive industries. With shale output unlikely to peak for at least another few years, the United States should continue to see strong growth in energy production, declining energy imports, and an improving trade balance that should help support the dollar.
There are many things to be concerned about in today's world. For the next few years at least, America's energy situation is not one of them.