The U.S. exported more oil-based fuels than it imported in the first nine months of this year, making it likely that 2011 will be the first time since 1949 that the nation is a net exporter of such goods, primarily diesel.
That's not all. The U.S. has reversed another decades-long trend. It began producing more crude oil in 2008 than the year before and accelerated that upswing 3% in the first nine months of this year compared with the same period in 2010. That production has helped reduce U.S. imports of crude oil by about 10% since 2006.
"It's dramatic. It's transformative," Edward Morse, a former senior U.S. energy official who now directs global commodities research at Citigroup, says of the historic shifts. He says the U.S. is importing a smaller share — 49% in 2010, down from 60% in 2005 — of the oil it uses, adding: "We're moving toward energy independence."
He says the U.S. economy benefits, because its low natural gas prices help make its steel and other manufacturing industries more competitive. He says U.S. consumers benefit with more jobs and gasoline prices that are lower and less volatile than in many countries.
Not all are cheering. The changes are exacting a brutal toll on the nation's health and environment, says Susan Casey-Lefkowitz of the Natural Resources Defense Council (NRDC), citing the greenhouse gas emissions of producing and refining fossil fuels.
The U.S., the world's second-largest greenhouse gas emitter after China, produced 4% more carbon dioxide last year than in 2009, when emissions dipped because of the recession, according to the Global Carbon Project, an international group of scientists.
American consumers benefit little from the U.S. oil boomlet, because their fuel prices depend heavily on a global oil market that remains tight and has probably already peaked in production, says Jeremy Rifkin, author of The Third Industrial Revolution: How Lateral Power is Transforming Energy, the Economy and the World.
Perhaps the bigger impact is on American foreign policy. The U.S. oil boomlet has amplified concurrent shifts in the global oil market. Today, half of net U.S. petroleum imports come from the Western Hemisphere, and half of that (or a quarter of the total) comes from Canada. Only 12% came from Saudi Arabia last year, down from nearly 19% in 1993.
"What's occurring is a rebalancing of the world oil supply," says Daniel Yergin, energy historian and author of The Quest: Energy, Security, and the Remaking of the Modern World. He says Brazil's newly produced offshore oil, which he calls "presalt" because it's beneath a thick layer of salt, will further tip the scales.
"The importance of the Middle East has decreased for us," says Michael Klare, author of the forthcoming The Race for What's Left: The Global Scramble for the World's Last Resources. "That's a dramatic change in the geopolitical equation."
Why the U.S. shifts?
What's driving the boomlet is increased production of two resources that previously weren't considered economically viable to develop.
"It's a double-barreled development, pardon the pun," says Martin Tallett, president of EnSys Energy, a Massachusetts-based oil industry consulting firm. He did a study for the Department of Energy on the proposed $7 billion Keystone pipeline, which would carry oil or tar sands from Canada through six U.S. states to the Gulf Coast.
This heavy crude — a mixture of sand, water, clay and a viscous oil known as bitumen — is found primarily in Canada's Alberta province. It's increasingly being exported to the U.S., where it's refined into petroleum products, many for export. Its production surpassed 1.1 million barrels per day in 2005 and is expected to nearly triple by 2015, according to Canada's National Energy Board.
The other resource is sometimes called "shale oil" but more accurately "tight oil," because it comes from shale and other rock formations. (It's different from "oil shale," which contains the oil precursor kerogen but remains costly to develop.)
Tight oil, produced mostly from the Bakken shale formation in North Dakota and Montana and the Eagle Ford one in Texas, is extracted in much the same way as natural gas — pumping pressurized water, sand and chemicals underground to fracture the rock and break loose the oil so it can flow to the surface. This process is often called "fracking."
"It's the new, new thing," Yergin, the energy historian, says of tight oil. He says its U.S. production could skyrocket to 2.9 million barrels per day by 2020. North Dakota, which accounts for the vast majority of this oil, produced 488,066 barrels per day in October 2011, up from 90,196 in January 2005, according to the state's Department of Mineral Resources.
"When shale gas worked, people said, 'Maybe this works for oil, too,' " Yergin says, noting that oil brings a higher return than natural gas. The result? A surge in production within the last two years. Yergin says this has produced needed jobs in an overall weak U.S. economy and, by expanding the global oil supply, has helped prevent or offset price spikes.
Tallett says the U.S. has been able to capitalize on that production because it has a flexible and efficient refinery network.
"We have some of the better refineries in the world — certainly the most complex," he says, adding they can handle different types of crude oil and shift their product line quickly to meet demand. He says they've upped production of diesel fuel, which is in great demand worldwide, and reduced that for gasoline, now in surplus.
Other factors contributing to the U.S. net export of petroleum products is the federally mandated use of ethanol, which has boosted its production and reduced demand for regular gasoline.
Gasoline demand is also down because Americans are driving less. They've been driving fewer miles every month since March, according to a USA TODAY analysis of data from the Federal Highway Administration.
Simply put, "The U.S. has been using less and producing more," says James Hamilton, an economics professor at the University of California-San Diego.
Environmentalists are concerned that the higher production of these unconventional, harder-to-reach oil resources carries increased dangers for air and water quality.
The NRDC's Casey-Lefkowitz says the development of tar sands produces more greenhouse gas emissions than that of regular crude oil, and if spilled, the heavy crude can be more difficult to clean up because of its viscosity. She says its production has taken off without regard to safety.
"My fear is that the same is happening with tight oil deposits," she says. "Whenever you fracture shale to get at oil," she says, "you're flaring off methane." The process wastes natural gas and uses huge volumes of water.
On Dec. 8, the U.S. Environmental Protection Agency said fracking might cause groundwater pollution. It said compounds likely associated with fracking chemicals had been detected in the groundwater beneath Pavillion, in central Wyoming.
A temporary boost?
Rifkin says the production of unconventional oil resources may provide a temporary boost, but it won't last — in the U.S. or worldwide. Citing a 2010 report by the International Energy Agency, a Paris-based organization, he says global peak production of crude oil probably occurred in 2006.
"We're now in the early stages of a volatile end game," he says, especially as China and India continue to develop and increase their energy consumption. "There's no easy way to drill our way out of this."
Rifkin, author and policy advocate, says the U.S. should move quickly to what he calls the "third industrial revolution," based on renewable energy, micro power plants and electric vehicles. He says he's discussed this approach with German Chancellor Angela Merkel, who he says supports it.
Yergin argues there's no clear limit to the world's oil resources as innovation has found ways to develop what once was considered undevelopable. Still, with global energy demand increasing and the climate warming, he sees benefits in energy efficiency and renewable energy.
Hamilton, the economics professor, says that the U.S. oil boomlet has reversed a historic decline in production, but that the nation won't ever go back to producing as much oil as in the 1970s or consuming as little as it did then.
"We're still importing a huge amount of crude oil," Hamilton says, and neither he nor the U.S. government expects that will change anytime soon.
"North Dakota's production, though growing, is still small compared to what we got out of Alaska," he says. "It doesn't change the long-term challenges or end the overall U.S. petroleum trade deficit."
