One of the most common refrains from 6 yrs ago (actually started by a Maryland politician but uttered repeatedly by Former Governor Sarah Palin) has started to pop up again as we approach another round of elections.
While this approaches a couple of third rail issues - politics and oil - I thought it's worth revisiting. The initial push to increase drilling in the US was tied to high gasoline prices for consumers at the pump. While politicians were very clever to never say "we need to get this oil to lower the cost to fill your tank" they would dance around the subject by saying "You're paying $4/gallon and we're sitting on billions of barrels of oil". It would be your job as the voter to incorrectly connect those dots.
Well, it's probably worth noting then that the Bakken Oil Fields in North Dakota/Montana produced it's billionth barrel of oil in earlier this week. Wow, a billion barrels of oil! What's the price of a gallon of gas in NY like $1.25? Nope, it's still $3.95.
Wait, but they're pulling all of that oil from North Dakota! Well, yes that is a lot of oil, but the US uses almost 7 million barrels/day so the entire production in the Bakken Field would last the US roughly 4 1/2 months.
Then there is the issue of who's oil is it? We sometimes confuse our oil companies for national oil companies like those in Saudi Arabia, Russia and Iran. Exxon Mobil, Chevron, etc are US based corporation with facilities around the world, but they are not state-owned. In fact, if you look at the list of 20 largest oil companies, most are state-run. Those countries are able to use their resources to influence local gas prices. Our corporations sell their oil into the global market and despite slack in the economy everywhere (0.1% GDP growth anyone?) the oil prices remain stubbornly high at around $100/barrel.
The second issue is very specific to the shale oil in the US. This oil is very expensive to retrieve and while we've known about this oil for decades it was never feasible because the cost to recover the fracked oil was thought to be around $70/barrel. Well, at $50/barrel you don't bother to drill but at $100/barrel you drill all day long. Since, oil seems to have reached a permanently high plateau above $90 there is a great deal of demand to drill, but if prices ever fall the economics will lead to many rusting wellheads in N. Dakota.
The final point on the US oil renaissance is that the fracked wells tend to dry up VERY quickly. I've seen some scary predictions of just how fast this boom could go bust. Some of these wells see their production fall 60-70% after the first year. This is why the oil companies are always looking for new sources of shale to drill -- Well, hello there Marcellus Shale :)
Like every story that is distilled into a 30 second sound bite for CNN there is more to the oil boom story than meets the eye.