A substantial rise in oil prices in recent months has led to a resurgence in American oil production, enabling the country to challenge the dominance of Saudi Arabia and dampen price pressures at the pump.
The success has come in the face of efforts by Saudi Arabia and its oil allies to undercut the shale drilling spree in the United States. Those strategies backfired and ultimately ended up benefiting the oil industry.
Overcoming three years of slumping prices proved the resiliency of the shale boom. Energy companies and their financial backers were able to weather market turmoil — and the maneuvers of the global oil cartel — by adjusting exploration and extraction techniques.
This year, the United States is expected to surpass Saudi Arabia and to rival Russia as the world’s leader, with record output of 10 million barrels a day, according to the International Energy Agency.
“This is a 180-degree turn for the United States and the impacts are being felt around the world,” said Daniel Yergin, the economic historian and author of “The Prize: The Epic Quest for Oil, Money and Power.” “This not only contributes to U.S. energy security but also contributes to world energy security by bringing new supplies to the world.”
The new energy power also relieves pressure on Washington to act militarily if tensions between Iran and Saudi Arabia break out into war. And it gives Washington the leeway to apply sanctions on other producers — as it has in Russia, and may in Iran or Venezuela — with far less risk to the global economy.
It is a striking contrast to the 1970s, when Arab oil boycotts forced motorists to line up for blocks to fill their tanks and the economy went into a tailspin. Even more recently, during the presidency of George W. Bush, domestic oil output was declining so rapidly that the country set a course to replace oil with biofuels like ethanol.
While scores of smaller companies went out of business, the survivors lengthened horizontal wells to yield more oil, and used clever hedging and drilling strategies to maximize profits even when prices slumped.
Experts note that when oil climbs to $60 a barrel and higher, as it has lately, a drilling rush commences — the national rig count has climbed by over a third in the last year — promising to refill domestic and even global energy inventories. Only a major war or other disruption is likely to send prices soaring.
“We have all suffered these depressed prices over the last two years and we are excited to see the new prices and we will respond accordingly,” said Harald Jordan, vice president for engineering at Peak Energy, a Colorado-based producer. “You will see rig activity continue to increase.”