As United States oil production surpasses Saudia Arabia some people probably want to know why gas price are still so high.
As previously reported by The Inquisitr, an oil fracking EPA study determined they couldn’t a definitive case where fracking has contaminated oil. Although, some studies claim fracking can lead to more earthquakes.
And it just so happens that the reason United States oil production has has risen more than 50 percent in the past five years is due to fracking. Most of the US crude oil, and natural gas, was stuck in shale rock and was unreachable for many years. Fracking works by pumping a mix of water and chemicals down into wells in order to break up the rock and release the trapped oil. But it took advancements in the fracking technology before it became cost effective for United States oil production.
In fact, the US met 89 percent of its own energy needs in March of 2013 and as of now is the world’s largest oil producer, surpassing even Saudia Arabia according to the PIRA Energy Group:
“(The U.S.) growth rate is greater than the sum of the growth of the next nine fastest growing countries combined and has covered most of the world’s net demand growth over the past two years. The U.S. position as the largest oil supplier in the world looks to be secure for many years.”
To give you an idea how fast this happened, news reports from earlier late last year estimated this wouldn’t happen until 2020. And China just recently surpassed the United States as the biggest oil importer.
United States oil production should average 12.1 million barrels per day in 2013, but how come US gas prices are still so high? While fracking shale oil has gotten much cheaper and efficient it’s still more costly than the relatively easy-to-reach Middle East oil. The average fracking rig is mounted on a 18-wheeler truck and has the horsepower of three Formula One racing cars necessary to raise the hydraulic pressure high enough. It takes about 10 days to drill a well while years ago it took over 15 days.
Part of the reason fracking is cost effective is because the oil futures markets have pushed the price of crude oil over $100 per barrel on the open market. Plus, only some of the fracking equipment has been shifted over from hunting for natural gas.
High Gas Prices: A US Political Problem
But you would assume since the United States now exports more oil than it imports that the economic rules of supply and demand should cause US gas prices to drop, right? Unfortunately, that’s where localized markets and politics have kept gas prices high.
Most of the surge in United States oil product has occurred in North Dakota, Wyoming, Colorado, and Oklahoma. Oil producers are fighting over limited oil pipeline capacity and are forced to use barges and trains, which increases the cost of domestic US oil by around $17 per barrel. But projects like the Keystone XL oil pipeline have been delayed by years due to politics.
While the majority of countries have been greatly expanding their oil refining capabilities the United States has lagged behind. The last US oil refinery was built in 2008, with the previous refinery going back to 1998. Fortunately, oil refining capacity has increased in existing refineries through upgrades or new construction but the United States still has to have a good percentage of its domestic oil refined in other countries. US refineries were also modified to take more heavy and sour crude from the Middle East and Canada, while our domestic oil requires refineries designed for light and sweet oil (meaning, lower density and sulphur content).
The final political angle is the 1975 US embargo on oil exports, which is still effective to this day. Since the United States is now capable of being an oil exporters this trade embargo has the potential for preventing the US oil industry from taking off. And much of the oil pipeline infrastructure is being allowed to fall apart:
With United States oil production making us the number one oil producer, what do you think should be done to lower US gas prices?