The widely-received news put forward by your GasBuddy analysts earlier this week, that persistently low gas prices will prompt more summer road trips, will start to play out today with the unofficial launch of summer driving season in the U.S.
But this counter-intuitive result didn’t happen by accident. For most drivers, higher prices associated with summer driving demand is a given; almost as routine as the sun rising in the east and setting in the west.
This year is different however and much of the credit lies with the ever-advancing technological breakthrough of hydraulic fracturing in several shale plays across America. Beginning around the last major oil price spike in 2007- 2008, this new process for unlocking stubborn oil and gas from shale rock became financially viable. As prices fluctuated for the proceeding decade, improvements in technology and scale allowed greater output for less, allowing shale producers today to extract oil at a break-even cost of $23-$30 a barrel.
Little wonder that with West Texas Intermediate (WTI) staying in the $50 a barrel range, oil services provider Baker Hughes has recorded 18 consecutive weeks of increases in the number of rigs involved with horizontal drilling/hydraulic fracturing. From the beginning of this year, that number has grown from 509 active rigs to 901, good for an estimated 870,000-barrel increase in U.S. oil production output.
Even with oil trading north of $40 a barrel, it is unlikely that the pace of rising oil rigs and output will slow down anytime soon with expectations that the U.S will likely see its domestic output breach 10 million barrels a day of production by year’s end. For OPEC/NOPEC which extended its 300,000 barrel a day output cut to March 2018, the U.S. shale numbers are ominous; for every barrel they take off the table, the U.S alone is replacing it with three.
For this reason, North American refiners seem content to take advantage of the growing availability of domestic crude stocks. In turn, their near record-breaking rates of gasoline production are serving as an effective and welcomed check on gasoline prices which our survey suggests, will see a 7% rise in planned trips with the majority of us taking two this summer.
Thanks to the shale revolution in America, more of us will be traveling further for visits and have a little more money to check out some of the snack options at gas stations along the way.