The surge in U.S. crude oil production over the past few years and overwhelmingly positive outlooks for continued output growth have inspired an almost unprecedented sense of complacency that our nation's energy woes are over for good.

Domestic crude production reached its highest annual level since the late 1980s last year and could hit its highest all-time level by 2016, according to some projections. But before you rush off and buy the biggest SUV you can find, you may want to take a closer look at the cold, hard facts about how much crude oil the U.S. really has and how long it will last.

Silhouettes of four oil pumps at sunset

Image source: Getty Images.

U.S. oil reserves highest since 1970s
According to the US Energy Information Administration (EIA), U.S. proved reserves of crude oil and lease condensate (a type of ultralight crude) rose by about 4.5 billion barrels, or 15.4%, last year to 33.4 billion barrels. That's the highest level since 1976. 

The main reason behind this rapid growth in reserves is the explosion of activity in Texas' Eagle Ford shale and Permian Basin and North Dakota's Bakken shale. Basically, improvements in drilling technologies made it economical to exploit previously inaccessible resources within these fields.

The fact that domestic reserves are the highest they've been since the late 1970s is certainly reason for optimism. These reserve additions aren't due to luck, but rather due to heavy investments in technology made by U.S. energy companies over the past several years. Without those technological improvements, it wouldn't have been possible to economically harvest these reserves.

How long will these reserves last?
Now for the less cheery news. At the current pace of drilling, these reserves aren't going to last for more than a decade or two. Let's do the math. Last year, annual crude production averaged just under 7.5 million barrels per day, which comes out to a little over 2.7 billion barrels for the year. Assuming we deplete reserves by 2.7 billion barrels each year, current reserves would run dry in less than 13 years.

Of course, that calculation is very simplistic because it assumes production will remain constant and we won't add any new reserves. Still, the point I'm trying to drive home is that even though U.S. oil production now exceeds every other country except Saudi Arabia and Russia, the size of our reserves is much smaller.

Currently, we rank 12th among the top 20 countries by proven crude oil reserves. That places us just ahead of China and Qatar, but below Libya and Nigeria. By contrast, Russian oil reserves are estimated to be 80 billion barrels, while the Saudis claim they have some 270 billion barrels remaining.

Technology holds the key
Now here's what could completely change things: technology. Just as technological progress has helped boost our recoverable oil estimates in recent years, it should continue to do so in coming years. Consider the Bakken, for instance. Currently, the play is estimated to contain total reserves of 150 to 900 billion barrels, according to Continental Resources, a leading Bakken driller.

While only 3.5% of these total reserves are currently recoverable using existing technology, technological progress could improve that recovery rate significantly and, with it, the volume of recoverable reserves. According to Pete Stark, senior director and advisor for upstream research at research and consulting firm IHS, further technological advances could boost Bakken recovery rates to as much as 12%-16% within a decade. That would provide a big boost to proved reserves.

The bottom line
There's no denying that the shale boom has been a remarkable game-changer for U.S. hydrocarbon production, as well as for our nation's trade balance and geopolitical leverage. But shale oil won't last forever; in fact, shale oil production could peak in as little as five years given the higher decline rates associated with shale wells.

That's why it's important to keep things in perspective and realize the shale boom isn't a panacea to the nation's -- or the world's -- most gripping challenge: our addiction to fossil fuels. It's merely a bridge that extends the amount of time we have to develop sustainable forms of energy that can power our planet without emitting massive quantities of carbon dioxide, raising the global temperature, and harming our environment.