The oil markets sold off yesterday because the United States achieved energy independence! Yahoo! Ok, maybe I am exaggerating. I sometimes get too excited. I know oil sold off yesterday because Spanish and Greek protestors took to the streets as Spain has to reveal its new austerity plan to the adoring crowds. I also know that oil is rebounding as speculation that China is going to step up to the plate with more easing after a report that showed Chinese industrial profits dropped 6.2 percent from a year earlier in August, falling for a fifth month. But still lost in all of the global turmoil is the fact that it is time to get excited about what might be a major story if it were not for all of the economic turmoil the world is going through.
As reported by Asjylyn Loder of Bloomberg News, US oil production last week hit the highest level since January 1997! Not only that, but according to data from the Energy Information Administration, America, in the first six months of this year, met 83 percent of its energy needs with its own domestic production. If the trend continues through 2012, it will be the highest level of self-sufficiency since 1991. Who said we can’t be energy independent?
Oh sure there is the dark side of this story. One reason we are hitting those impressive numbers is because demand is down due to weakness in the economy. But still there is no doubt that the country is becoming more fuel efficient as well as benefiting from the miracle of horizontal drilling and hydraulic fracturing. Data showed that last week crude oil production went up by 3.7 percent to an impressive 6.509 million barrels a day. Because of that US imports of foreign oil have fallen by 3.2 percent from the same period a year earlier.
And what is more we should see US production continue to rise as the most exciting oil production innovations since Colonel Edwin Drake drilled down into northwestern Pennsylvania. The US with a combination of oil production and more reliance on natural gas and fuel efficiency should achieve energy Independence in the future! Take that OPEC!
Of course that does not mean that OPEC won’t keep trying. David Bird of Dow Jones wrote last week that funny thing happened on the way to U.S. energy independence — profits got in the way. He writes that the shale oil boom in the U.S. and Canada, where new technologies have been used to unlock crude trapped in rock formations, had been widely touted as the way to wean the U.S. off Mideast imports and lead the nation to energy self-sufficiency. Yet he points out that US. crude imports from the Persian Gulf leapt 30% in the first half of this year versus same period last year, according to the U.S. Energy Department's Energy Information Administration. Crude imports from the region recently topped those from Canada in May 2012 — which has been the top U.S. supplier since early 2006. This is coming even though flows from domestic shale oil fields have lifted U.S. output to a 14-year high, near 6.3 million barrels a day, and crude imports from all suppliers are 2.2% below year-earlier levels.