Article is too long to post. It seems like the equation is America can be petrolium independent as long as oil is $90+ per barrell.
MIDLAND, Tex. — The desolate stretch of West Texas desert known as the Permian Basin is still the lonely domain of scurrying roadrunners by day and howling coyotes by night. But the roar of scores of new oil rigs and the distinctive acrid fumes of drilling equipment are unmistakable signs that crude is gushing again.
And not just here. Across the country, the oil and gas industry is vastly increasing production, reversing two decades of decline. Using new technology and spurred by rising oil prices since the mid-2000s, the industry is extracting millions of barrels more a week, from the deepest waters of the Gulf of Mexico to the prairies of North Dakota.
At the same time, Americans are pumping significantly less gasoline. While that is partly a result of the recession and higher gasoline prices, people are also driving fewer miles and replacing older cars with more fuel-efficient vehicles at a greater clip, federal data show.
Taken together, the increasing production and declining consumption have unexpectedly brought the United States markedly closer to a goal that has tantalized presidents since Richard Nixon: independence from foreign energy sources, a milestone that could reconfigure American foreign policy, the economy and more. In 2011, the country imported just 45 percent of the liquid fuels it used, down from a record high of 60 percent in 2005.
“There is no question that many national security policy makers will believe they have much more flexibility and will think about the world differently if the United States is importing a lot less oil,” said Michael A. Levi, an energy and environmental senior fellow at the Council on Foreign Relations. “For decades, consumption rose, production fell and imports increased, and now every one of those trends is going the other way.”
How the country made this turnabout is a story of industry-friendly policies started by President Bush and largely continued by President Obama — many over the objections of environmental advocates — as well as technological advances that have allowed the extraction of oil and gas once considered too difficult and too expensive to reach. But mainly it is a story of the complex economics of energy, which sometimes seems to operate by its own rules of supply and demand.
But the domestic trends are unmistakable. Not only has the United States reduced oil imports from members of the Organization of the Petroleum Exporting Countries by more than 20 percent in the last three years, it has become a net exporter of refined petroleum products like gasoline for the first time since the Truman presidency. The natural gas industry, which less than a decade ago feared running out of domestic gas, is suddenly dealing with a glut so vast that import facilities are applying for licenses to export gas to Europe and Asia.
National oil production, which declined steadily to 4.95 million barrels a day in 2008 from 9.6 million in 1970, has risen over the last four years to nearly 5.7 million barrels a day. The Energy Department projects that daily output could reach nearly seven million barrels by 2020. Some experts think it could eventually hit 10 million barrels — which would put the United States in the same league as Saudi Arabia.
More recently, with gasoline prices rising and another election looming, Mr. Obama has struck a different chord. He has opened new federal lands and waters to drilling, trumpeted increases in oil and gas production and de-emphasized the challenges of climate change. On Thursday, he said he supported expedited construction of the southern portion of the proposed Keystone XL oil pipeline from Canada.
Mr. Obama’s current policy has alarmed many environmental advocates who say he has failed to adequately address the environmental threats of expanded drilling and the use of fossil fuels. He also has not silenced critics, including Republicans and oil executives, who accuse him of preventing drilling on millions of acres off the Atlantic and Pacific Coasts and on federal land, unduly delaying the decision on the full Keystone project and diverting scarce federal resources to pie-in-the-sky alternative energy programs.
So in 2003, Jim Henry, a West Texas oilman, tried a bold experiment. Borrowing an idea from a fellow engineer, his team at Henry Petroleum drilled deep into a hard limestone formation using a refinement of fracking. By blasting millions of gallons of water into the limestone, they created tiny fissures that allowed oil to break free, a technique that had previously been successful in extracting gas from shale.
The test produced 150 barrels of oil a day, three times more than normal. “We knew we had the biggest discovery in over 50 years in the Permian Basin,” Mr. Henry recalled.
There was just one problem: At $30 a barrel, the price of oil was about half of what was needed to make drilling that deep really profitable.
By 2008, daily global oil consumption surged to 86 million barrels, up nearly 20 percent from the decade before. In July of that year, the price of oil reached its highest level since World War II, topping $145 a barrel (equivalent to more than $151 a barrel in today’s dollars).
Oil reserves once too difficult and expensive to extract — including Mr. Henry’s limestone fields — had become more attractive.
If money was the motivation, fracking became the favored means of extraction.
While fracking itself had been around for years, natural gas drillers in the 1980s and 1990s began combining high-pressure fracking with drilling wells horizontally, not just vertically. They found it unlocked gas from layers of shale previously seen as near worthless.
By 2001, fracking took off around Fort Worth and Dallas, eventually reaching under schools, airports and inner-city neighborhoods. Companies began buying drilling rights across vast shale fields in a variety of states. By 2008, the country was awash in natural gas.
Fracking for oil, which is made of larger molecules than natural gas, took longer to develop. But eventually, it opened new oil fields in North Dakota, South Texas, Kansas, Wyoming, Colorado and, most recently, Ohio.
Meanwhile, technological advances were making deeper oil drilling possible in the Gulf of Mexico. New imaging and seismic technology allowed engineers to predict the location and size of reservoirs once obscured by thick layers of salt. And drill bits made of superstrong alloys were developed to withstand the hot temperatures and high pressures deep under the seabed.
“Our dependence on foreign oil is down because of policies put in place by our administration, but also our predecessor’s administration,” Mr. Obama said during a campaign appearance in March, a few weeks after opening 38 million more acres in the gulf for oil and gas exploration. “And whoever succeeds me is going to have to keep it up.”
Today, more than 475 rigs — roughly a quarter of all rigs operating in the United States — are smashing through tight rocks across the Permian in West Texas and southeastern New Mexico. Those areas are already producing nearly a million barrels a day, or 17 percent more than two years ago. By decade’s end, that daily total could easily double, oil executives say, roughly equaling the total output of Nigeria.
“We’re having a revolution,” said G. Steven Farris, chief executive of Apache Corporation, one of the basin’s most active producers. “And we’re just scratching the surface.”
It is a revolution that is returning investments to the United States. Over several decades, Pioneer Natural Resources had taken roughly $1 billion earned in Texas oil fields and drilled in Africa, South America and elsewhere. But in the last five years, the company sold $2 billion of overseas assets and reinvested in Texas shale fields.
If there is a loser in this boom, it is the environment. Water experts say aquifers in the desert area could run dry if fracking continues expanding, and oil executives concede they need to reduce water consumption. Yet environmental concerns, from polluted air to greenhouse gas emissions, have gained little traction in the Permian Basin or other outposts of the energy expansion.
A Turn Toward Efficiency
If the Permian Basin exemplifies the rise in production, car-obsessed San Diego is a prime example of the other big factor in the decline in the nation’s reliance on foreign oil.
Just since 2007, consumption of all liquid fuels in the United States, including diesel, jet fuel and heating oil, has dropped by about 9 percent, according to the Energy Department. Gasoline use fell 6 to 12 percent, estimated Tom Kloza, chief oil analyst at the Oil Price Information Service.
Mr. Girten is one of millions of Americans who have downsized. S.U.V.’s accounted for 18 percent of new-car sales in 2002, but only 7 percent in 2010.
The surge in gasoline prices nationwide — they are already at a record level for this time of year — has contributed to the shift toward more fuel-efficient cars. But a bigger factor is rising federal fuel economy standards. After a long freeze, the miles-per-gallon mandate has been increased several times in recent years, with the Obama administration now pushing automakers to hit 54.5 m.p.g. by 2025.
As Americans replace their older cars — they have bought an average of 1.25 million new cars and light trucks a month this year — new technologies mean they usually end up with a more efficient vehicle, even if they buy a model of similar size and power.
Longer-term social and economic factors are also reducing miles driven — like the rise in Internet shopping and telecommuting and the tendency of baby boomers to drive less as they age. The recession has also contributed, as job losses have meant fewer daily commutes and falling home prices have allowed some people to afford to move closer to work.
The trend of lower consumption, when combined with higher energy production, has profound implications, said Bill White, former deputy energy secretary in the Clinton administration and former mayor of Houston.
“Energy independence has always been a race between depletion and technologies to produce more and use energy more efficiently,” he said. “Depletion was winning for decades, and now technology is starting to overtake its lead.”