Production has been booming for awhile, but last year American demand for the black stuff grew by 390,000 barrels a day
The oil production boom in the United States is old news, something we covered in a special section just a few months ago. Improved hydraulic fracturing and directional drilling has helped unlock vast new tight oil supplies, mostly in Texas and North Dakota. But I don’t think everyone has realized just how much boom is in this boom.
New numbers from the International Energy Agency (IEA) might change that. Crude oil production in the U.S. rose by 990,000 barrels a day (bbd) last year, a increase of 15% from the year before. That’s the fastest such absolute annual growth of any country in 20 years. And it’s not just production: The IEA reports that in 2013, U.S. demand for oil grew by 390,000 bbd, or about 2%, after years of decline. For the first time since 1999, U.S. demand for oil grew faster than China’s demand, which rose by 295,000 bbd, the weakest increase in six years. So not only is the U.S. producing a gusher of oil, but it’s also consuming more crude.
That increase in domestic demand could a good sign for the economy, if not for the environment. Growth in oil demand was mostly steady in the U.S. from the early 1980s on, before plateauing a couple of years before the financial crisis of 2008. Since then it’s mostly dropped. Average consumption in the U.S. was 18.8 million bbd between 2009 and 2012, compared to 205 million bbd between 2005 and 2008. Economic growth and energy demand have historically gone together—more businesses using more energy, more workers driving to the office—so last year’s unexpected increase in oil demand could mean the U.S. is rebounding, as Antoine Heff, head of oil market research at the IEA, told the Financial Times:
It is clear that the US economy is rebounding very strongly thanks to its energy supplies. Sometimes oil is a lagging indicator, but sometimes it is the opposite and shows that an economy is growing faster than thought.
According to the IEA, much of that growth has been in the petrochemical industry, which has taken advantage of burgeoning domestic oil supply. U.S. exports overall hit a record high in November, cutting the trade deficit to its lowest level since 2009. And much of that export growth came not from manufactured goods but from diesel and gasoline, with the U.S. exporting $13.3 billion worth of petrochemical products in November. With oil companies forbidden from exporting crude from the U.S.—though they’ve been lobbying lately to get that changed—refineries have taken up the slack, benefiting from the fact that domestic oil is often sold at a discount (they’ve also benefited from low natural gas prices, thanks to shale drilling). It’s not for nothing, as Mitchell Schnurman noted in the Dallas Morning News, that the oil capital of Houston led the nation in exports in 2012, ahead of the New York area.
But even if the U.S. economy does rebound—and boom times in the petrochemical industry don’t necessarily translate to the rest of the country—don’t expect the U.S. to go all the way back to its gas guzzling days. There are other reasons besides a declining economy that explain why U.S. oil demand fell so much over the past several years. Cars are now more fuel-efficient than ever, thanks to tougher fuel economy standards and growing consumer preferences for lighter, smaller cars and hybrids. But we’re also driving less. An analysis by Michael Sivak at the University of Michigan Transportation Research Institute found that 9.2% of U.S. households in 2012 were without a vehicle, compared to 8.7% in 2007. Vehicle miles traveled has largely plateaued over the last several years, indicating the U.S.—like other developed countries—may have reached something like “peak car.”
That’s arguable—the drop in the percentage of households with cars could well have more to do with high unemployment and slugging economic growth than anything else. But while the boom in domestic oil production has helped stabilize gas prices—a gallon cost an average of $3.32 a gallon in 2013, just a little more than in 2012—the days of cheap gas are almost certainly over. The future of oil demand is going to be in the developing world—especially China, where consumers bought over 20 million cars in 2013, compared to 15.6 million in the U.S. 2013 will likely turn out to be a blip in that epochal shift.