According to figures released by the American Petroleum Institute last week, domestic oil production rose 780,000 barrels per day (bpd) in 2012, a 13.8 percent rise over 2011 and the largest annual increase in American history! Daily production is almost back to 7 million barrels, a level not achieved since 1992. This is an amazing reversal for fields that appeared to be in terminal decline and were Exhibit A for Peak Oil Theory.
The graph shows U.S. oil production since 1940 in barrels per day. The horizontal axis is time and the vertical axis is production in millions of bpd.
U.S. production peaked in November 1970, when it briefly moved over 10 million bpd. Production topped out at that level, however, and immediately went into steep decline – an experience unprecedented at the time. (M. King Hubbert had predicted in 1954 that American production would peak in 1969 and became famous as the prophet of “Hubbert’s Peak.”) Few people took note, however, and our imports jumped from 20 percent to 33 percent in a few years. The Arab Oil Boycott and the rise of OPEC were the result.
After that it was mostly downhill for American production, with only a brief upturn in the late 1970s due to the opening of the Alaska Pipeline. But Prudhoe Bay peaked in 1979 and by 2007 national output had declined to 1940s levels. Imports were above 60 percent and the future looked bleak.
Now suddenly all that has reversed. With the development of horizontal drilling and hydraulic fracturing (“fracking”), the Bakken Shale has suddenly become hugely productive. The Eagle Ford is being developed in Texas and the Monterey Shale in California promises to be the biggest of all. Already there is talk that the US could surpass Saudi Arabia by 2030.
But things are never certain. Production in these tight fields may play out sooner than expected. Improved mileage and the development of alternative vehicles may cut into demand. Or growing demand from Asia could swamp all these improvements. Strangely enough, even as output increases at a record rate, gasoline prices have risen to the highest level in history.
One thing seems certain: Peak Oil Theory is now in retreat and the US will be playing a widening role in providing the world's oil supply.