Surging U.S. oil production has sent oil prices tumbling.
The shale revolution, which began here at home, has driven oil prices down 25 percent since June, and OPEC is reeling. With the U.S. now the world’s largest natural gas producer and soon to become the world’s largest oil producer, it may be tempting to think that the world, particularly the United States, has entered a new age of energy abundance, but that would be a grave mistake.
The instability that has driven up oil prices over the past year — conflict in Libya, the Russian invasion of Ukraine, sanctions on Iran and war in Iraq and Syria — is far from over. The market may have grown accustomed to geopolitical turmoil in key energy producing states, but the threat of major supply disruptions has not gone away.
In fact, just a few months ago many analysts thought it a small miracle that oil prices, already well above $100 per barrel, weren’t climbing higher. Why not? The reason is that U.S. production, up more than 60 percent since 2008, was almost singlehandedly keeping prices in check.
Holding oil prices steady won’t just take keeping existing production online, it will also require adding new sources of supply. The global demand for oil continues to rise. Millions of new drivers are filling China’s and India’s roads every year.
Unfortunately — and erroneously, in all likelihood — war-torn Iraq recently was named by the International Energy Agency (IEA) as the key country for meeting growing world oil demand in the coming two decades.
In May, the IEA reported that Iraq was producing 3.4 million barrels of oil per day. IEA projections pegged Iraqi production rising to 5.8 million barrels per day by 2020 and to 7.9 million barrels per day by 2035. As U.S. laser-guided bombs now are trying to stem the ISIS advance on Iraqi oilfields, these projections look wildly optimistic, if not absurd.
Almost 1 million barrels of crude oil are being pumped in Libya — the same Libya that doesn’t have a central government and is again in the midst of civil war.
The world needs U.S. oil production more than ever.
Shale oil production isn’t just an American success story — it has been a lifesaver in the global energy marketplace. And despite the Obama administration’s willingness to take credit for the surge in domestic production, it has come largely despite the administration’s efforts — not because of them.
Mr. President, you didn’t build our globally important energy sector.
Shale production takes place almost entirely on private land where regulation of drilling is handled, quite effectively, by the states. While total U.S. oil production has increased dramatically in the past few years, production on federal lands between 2009 and 2013 is down 6 percent. Of course, the physical locations of shale deposits contribute to that trend, but substantial regulatory and permitting hurdles continue to keep many acres of publicly owned lands off limits to exploration and recovery.
Smarter energy policy peels back the barriers to environmentally responsible energy production on federal lands and resists calls to overregulate the burgeoning shale revolution. The world needs the steadying hand of expanding U.S. energy supplies, and communities across the country need the good jobs that come with sustained and sustainable private investment in energy development.
Mrs. Clinton, don’t let anyone tell you that only the public sector is responsible for economic prosperity.
Just because we are in a season of oil and natural gas plenty now does not mean that winter will not return. So, let’s all enjoy lower prices at the pump while they last, but craft an energy policy as if they are the exception, not the rule.
William F. Shughart II, research director and senior fellow of the Independent Institute, is J. Fish Smith Professor in Public Choice at Utah State University’s Huntsman School of Business.