The year is 1953. Dwight D. Eisenhower is inaugurated U.S. President. The Korean War is ending. Dr. Jonas Salk develops the first polio vaccine. And Chevrolet unveils a new roadster…the Corvette. But perhaps lost in all the excitement of that year was that it represents the last time the U.S. was a net exporter of energy products of oil and fuel, producing and exporting more than it imported.
The remarkable return of U.S. oil production made possible through technology enabling horizontal drilling, and hydraulic fracturing of oil-rich shale sediment, otherwise known as “fracking”, lies at the heart of the rebound. According to the Energy Information Agency (EIA), its success means the U.S. will once again reach a historical benchmark in just four years – four years ahead of schedule.
In doing so, not only will that newfound status as a net energy exporter be achieved, but on the way there, America will pass Saudi Arabian output to become the world’s second greatest supplier behind Russia. The American energy system has no doubt undergone an incredible transformation.
The timing of this milestone, which few would have conceived of five years ago and none a decade ago, comes amidst a growing awareness that global demand for oil and oil products are expected to grow for at least another decade, making the surge in U.S. production a matter of good timing that could continue to keep a check on dramatic spikes in energy costs.
Even with the recent downturn in oil prices, related in no small part to fears from the equities markets, the world remains on track to increase its appetite for oil. While some producing countries are surging ahead, other traditional suppliers are faced with limitations in capital and infrastructure, notably Venezuela in the first instance and Canada in the second. Canada, whose regulatory process for pipeline approval is both fraught with political intrigue and a time consuming review process that apparently changes with each new government, explains, in part, why limited pipeline options to U.S. and other markets leaves its benchmark heavy oil, WCS (Western Canadian Select), selling at a $32 a barrel discount to WTI (West Texas Intermediate). It is the world’s most discounted oil and its bleak outlook represents a reason why investment in U.S. oil output has increased while Canada’s, continues to decline, despite greater proven reserves.
As generations of older North Americans vividly recall the days of oil shocks, embargoes, cartels and long lines or alternate days to fill up at the pumps, new techniques in energy production has given this generation freedoms many thought would remain a fond memory of a bygone era.