Some Charts And Updates On America's Amazing Shale Revolution - It's Not Over Yet

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Includes: BNO, DBO, DNO, DTO, DWTI, OIL, OLEM, OLO, SCO, SZO, UCO, USL, USO, UWTI
by: Mark J. Perry

The Energy Information Administration released a lot of year-end production and other energy-related data this week, and there's been a lot of shale energy-related news recently, so I present below 10 items (including 6 charts) highlighting America's Amazing Shale Revolution.

oil

1. US Crude Oil Production (above). According to new data from the Energy Information Administration (EIA), the US produced an average of 9.43 million barrels of crude oil per day (bpd) last year, which was the fourth highest year for domestic crude oil output in history (see chart above). Slightly higher crude oil production took place in 1970 (9.6 million bpd, the highest amount ever), 1971 (9.5 million bpd) and 1972 (9.44 million bpd).

More than maybe any other chart, I think the one above of US oil production over more than a century captures the "Great American Shale Oil Revolution in One Chart." From the previous peak US oil production in the early 1970s, there was a gradual decline over more than three decades from nearly 10 million bpd to only 5 million bpd by 2008. And then, thanks to revolutionary, "Made in the USA" drilling and extraction technologies, America's petropreneurs unlocked the oceans of oil trapped in tight shale rock formations miles below the ground. Amazingly, it only then took 7 years of shale oil production to completely reverse the previous 36-year decline in America's crude oil output, bringing the country's oil production to 9.7 million bpd last April, before falling gradually to bring the annual average last year down to 9.43 million bpd. Carpe oleum.

2. US Shale Oil Producers Message to OPEC? "$40 per barrel is the new $70, and above $40, we are coming back," see Reuters article here.

3. Quotation of the Day on Today's Oil Market, from the International Energy Agency's Medium Term Oil Market Report 2016 (emphasis added):

In 2016, we are living in perhaps the first truly free oil market we have seen since the pioneering days of the industry. In today's oil world, anybody who can produce oil sells as much as possible for whatever price can be achieved. Just a few years ago such a free-for-all would have been unimaginable but today it is the reality and we must get used to it….. The long-term consequences of this new era are still not fully understood….

natgas

4. US Natural Gas Production (above). The EIA also released data this week showing that America's natural gas production increased to nearly 33 trillion cubic feet last year, establishing a new annual production record for domestic natural gas (see chart). The percentage increase in natural gas production of almost 30% since the shale revolution started around 2008 isn't as high as the nearly doubling of crude oil output over the last 7 years, but is still a very significant turnaround and reversal from the flat natural gas production in the pre-shale era before 2008 of less than 25 trillion cubic feet per year. As predicted by basic economics, the record-high production of natural gas from the shale-drilling boom is bringing gas prices down to the lowest levels since the 1990s, see next item.

5. Shale Fact of the Day. From the WSJ article "Natural Gas Prices Fall to 17-Year Low":

Natural gas futures for April delivery recently fell 6.5 cents, or 3.6%, to $1.726 a million British thermal units on the New York Mercantile Exchange. Prices traded as low as $1.69/mmBtu earlier in the session, on track for the lowest settlement since March 1999.

6. Positive Economic Impact of Low US Energy Prices. From the article "Low Oil, Natural Gas Prices Driving A Building Boom In US Petrochemicals Sector":

The plunge in energy prices is driving a U.S. building boom for plants that turn crude oil and natural gas into motor fuels, chemicals and fertilizer. Energy companies proposed or received approval to build 140 petrochemical projects in the last five years as falling oil and natural gas prices made it cheaper to refine and process the raw materials. Nearly one-third of those projects, or 44 facilities, were proposed or permitted in 2015 alone.

propane

7. US Exports of Propane (above). As a result of America's abundance of shale gas, US exports of natural gas liquids (propane and propylene) jumped to a new record high last year of more than 600,000 barrels per day (bdp) on an annual basis (displayed above) and to a new monthly high in December of more than 750,000 bpd, according to new data from the EIA (see chart). See more details from a Bloomberg report here.

usenergy

8. US Energy Self-Sufficiency (above). Thanks to America's abundance of shale resources and the new drilling technologies that have brought those energy assets to the market, the chart above shows that the US was more energy self-sufficient last year (through November) than any year since 1970. Before the shale revolution, America was growing increasingly dependent on foreign sources of energy and in 2005 produced domestically less than 70% of the nation's energy consumed, an all-time low. Last year, America's energy self-reliance reached a 45-year high as domestic energy production provided more than 91% of the energy consumed.

netoil

9. US Net Petroleum Imports (above). Related to the charts in Items #1 and #4 above, the chart above shows that America's net petroleum imports fell to a 45-year low in 2015 of only 24.2%, the lowest level since 1970. In 2005 before the shale revolution completely changed the global landscape of energy distribution, America was dependent on foreign countries for more than 60% of our total oil supply. In just a decade, US net petroleum imports fell to only 24%, as America's newly accessible bonanza of shale resources replaced foreign sources of petroleum that often come from unstable or unfriendly parts of the world.

energyshares

10. US Energy Production: Fossil Fuels vs. Renewables (above). The final chart above shows the shares of total US energy production coming from: a) fossil fuels (coal, natural gas and crude oil) vs. b) renewable energy sources (hydro-electric, solar, wind, biomass) in each year between 1949 and 2015 (through November). Despite Obama's 7-year "war on fossil fuels" and all of the widespread political, progressive support for promoting solar and wind as "energy sources of the future," the chart above displays the energy reality: Fossil fuels provided 79.8% of the energy produced in America last year, the highest share since 2003, while renewable energy accounted for less than 11% of the energy produced (10.83%), the lowest share since 2010. Considering that in 1949, renewable energy (hydro-electric and biomass) represented 9.37% of the total US energy produced, and we find out there really hasn't been a lot of progress towards the goal of replacing fossil fuels with solar and wind. We also see in the chart that the fossil fuel share of total domestic energy produced has remained steady at about 80% for the last two decades. So as far as Obama's war on fossil fuels goes, I think we'd have to conclude that so far fossil fuels are winning.

Bottom Line: I've made the case many times before on CD (and elsewhere) that America's Amazing Shale Revolution is arguably one of the most remarkable energy, economic, entrepreneurial, and technological success stories in history. The charts, data and reports above help to tell part of that remarkable story.

And make no mistake, the shale revolution is not going away, it's here to stay and will be part of the global energy landscape for a long time. Despite a temporary slowdown and setback in domestic oil production in response to low oil prices, America's bonanza of shale resources won't vanish, but will remain available and accessible when needed. As we learn from the Reuters article above in Item #2, America's petropreneurs like billionaire oilman Harold Hamm stand ready to start drilling shale oil again as soon as oil prices rebound back above $40 per barrel. And the shale producers will come back leaner and meaner than ever in the upcoming Shale 2.0 period, thanks to ongoing technological improvements in drilling and extraction technologies, less costly and shorter drilling times for new wells, and increases in the initial shale output flowing from new wells. When it comes to the future of America's new status as an energy super-power, that's a future of energy abundance that still looks very bright to me.