Robert Bryce explains for National Review Online readers why shale could be described as President Obama’s “spurned friend.”
No president in modern American history has bashed the oil and gas industry more than Barack Obama. And none has benefited from that industry more.
Proving that last sentence is easy. It requires only that we imagine what world oil prices — and the U.S. economy — would look like in the absence of the shale gale, the multi-state surge in domestic oil and gas production of the past few years, as drillers have figured out how to produce vast quantities of methane and liquids from shale deposits.
Let’s start with oil prices. The possibility of a wider conflict in Syria has led to a surge in oil prices. They’re up by about $7 per barrel since the August 21 chemical-weapons attack in Syria. Attacks on pipeline infrastructure in Nigeria and Iraq, along with the ongoing conflict in Libya and the continuing shortfalls in Iranian production, have added further uncertainty. In August, according to the Energy Information Administration, the volume of unplanned supply disruptions in the global oil market totaled 2.7 million barrels per day.
Luckily for Obama, U.S. oil production is soaring. Last year, it rose by about 800,000 barrels per day, the biggest annual increase since 1859. And it is expected to rise by more than 800,000 barrels per day this year, which would set another record.
No other country in the world is growing its oil output as quickly as the U.S., and that production is helping to offset the shortfalls created by the upheavals in other countries. On Tuesday, Anas Alhajji, the chief economist at NGP Energy Capital Management in Dallas, told me that “there’s no doubt that the shale gale has helped keep a lid on oil prices.”
Although Alhajji wouldn’t provide any estimates for what global oil prices might be without the surge in U.S. production, it’s easy to imagine their coming close to, or eclipsing, the $150 a barrel they hit back in 2008.
The savings to the U.S. economy from the surge in natural-gas production are equally obvious. Over the six-year period from 2003 to 2008, U.S. natural-gas prices averaged about $7 per thousand cubic feet. Today, the spot price for natural gas is about $3.50. To make the math simple, let’s assume a price reduction of $3 per million cubic feet. With the U.S. now consuming about 70 billion cubic feet per day, the drop in natural-gas prices is saving consumers about $210 million per day, or nearly $77 billion per year.