American ingenuity, drive sparked shale oil revolution

In the 1970s, Americans faced long lines at gasoline pumps and the country depended heavily on oil imports from the Middle East. How things have changed. Today the United States is the world’s largest crude oil producer, surpassing Russia and Saudi Arabia in 2018, according to the U.S. Energy Information Administration.

The reason is no secret. The U.S. now extracts oil and natural gas in abundance from shale by fracking, pumping water and chemicals down deep wells to fracture rocks and tap resources that had been thought irretrievable.

Other countries have shale, and some are engaged in fracking. Yet nobody extracts as much oil and gas as American oil producers.

Chart showing oil production by three countries over 20 years (State Dept./D. Thompson)What’s made the difference, says Gary Sernovitz, author of The Green and the Black: The Complete story of the Shale Revolution, is that American oil producers kept innovating and experimenting with new ways to extract these resources.

A lot of improvements were small, but they added up. “It’s sort of like the iPhone. You think, ‘What’s new about it? Computers aren’t new, apps aren’t new, cellphones aren’t new,’ but the technology got combined in new, novel ways to produce something revolutionary,” he says.

The American commitment to free enterprise also helped ignite the oil gusher.

“The U.S. has a tradition of small, entrepreneurial companies that go after any way to make money. A lot of times they didn’t, but they always kept trying to innovate,” says Sernovitz.

“You had infrastructure, pipelines and refineries, and a lot of capital that flowed in … and fueled creativity and trial and error,” he adds. “And you have private ownership of minerals in the United States. That’s very different than in other countries,” where state-owned companies dominate.

While the U.S. is producing almost 11 million barrels of oil daily and exporting 9 million barrels of oil, gas and petroleum products, it still imports several million barrels a day to meet its needs.

U.S. refineries are geared more to processing heavier, lower-grade, imported crude than the lighter, higher-quality oil now coming out of North Dakota and South Texas, says Tyler Priest, a University of Iowa energy historian. That makes it more profitable to export the light oil.

While the United States used to import two-thirds of its crude, it now imports less than one-fourth.

And that trend is expected to continue. The Energy Information Administration says the United States has been a net energy importer since 1953 but likely will become a net exporter by 2020.