ROB Insight is a premium commentary product offering rapid analysis of business and economic news, corporate strategy and policy, published throughout the business day. Visit the ROB Insight homepage for analysis available only to subscribers.
No less authority than the United States government itself has declared that some time this year, the country should reach a landmark not seen in nearly two decades – indeed, one that many experts believed had been permanently consigned to the history books. The U.S. will be producing more oil than it is importing.
The U.S. Energy Information Administration (IEA) published a report Wednesday forecasting that monthly crude production in the United States is on target to surpass net imports by October. The last time this happened was in 1995.
One much-talked-about cause for this has been the shale-oil boom of the past couple of years, which has rapidly and dramatically expanded U.S. domestic oil supplies. The IEA expects crude production to reach eight million barrels a day in the 2014 fourth quarter – levels not seen since 1988.
While the IEA admits that the timing of these forecasts could be thrown off – something researchers at Colorado State University believe is more likely than not, based on their December forecast – the fact remains that U.S. oil output has, in the past two years, reversed nearly two decades of declines.
That has to be a kick in the teeth to peak-oil proponents, who have pointed to the long and relentless fall in U.S. production (it peaked in 1970, and dropped by more than 50 per cent from 1985 to 2009) as evidence that U.S. and global oil supplies are destined to eventually run dry. The peak-oil argument has been a driving force behind the energy-security debate over the past decade.
The sudden reversal of U.S. production by no means disproves the peak-oil theory; after all, all these new tight-oil fields could, as many experts fear, prove to have relatively short production lives. Nevertheless, the fact remains that the unleashing of these new supplies, made possible by advancements in drilling technologies, has set back the argument an entire generation.
Meanwhile, another key and often overlooked source for the turnaround has been the steady decline in U.S. consumption of liquid fuels. As domestic oil production has risen, imports have been falling since before the recession. The IEA predicted that net crude imports will fall below seven million barrels a day in the 2014 fourth quarter – a 19-year low.
In that light, it becomes easier to see how the Keystone XL pipeline project has become a hard sell south of the border. Canada's rich supplies of oil sands crude have become, if not ultimately less relevant to the U.S. energy-security question, certainly far less urgent. The U.S. government's own numbers say so.
David Parkinson is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow him on Twitter at @ParkinsonGlobe .
David Parkinson