API: Oil production from US fracking stabilizes world prices

By The Bakken Magazine Staff | December 12, 2014

A study on the effects of fracking operations in the U.S. show that not only has the economic impact been positive, but also that domestic oil and gas production has been a stabilizing influence on world oil prices.

The report, conducted by ICF International for the American Petroleum Institution, estimates what prices and production would be without horizontal drilling and hydraulic fracturing and how these advanced drilling technologies have impacted gasoline prices. New plays such as the Bakken were responsible for about 48 percent of U.S. oil production and shaved up to 94 cents per gallon from fuel prices in 2013.

“Citigroup analysts have described it as a $1.1 trillion global stimulus—at no cost to taxpayers,” said Kyle Isakower, API’s vice president for regulatory and economic policy. “Lower crude prices are also providing a check on the influence of foreign suppliers like OPEC, and Russia, which relies on oil and natural gas revenues for over half its federal budget.”

While there’s still debate about how markets will trend, Isakower said the report shows there’s no question that increased oil and gas production in the U.S. has saved money for American consumers, savings that translate into more disposable income that benefits retailers and businesses.

He referred to a report from AAA that says a majority of U.S. gas stations were posting prices below $3 per gallon.

“This would normally seem impossible given the turmoil we’ve experienced overseas,” Isakower noted. “In the last few months, motorists have watched with growing optimism as U.S. gasoline prices fell to levels not seen in nearly four years.”

According to ICF’s analysis, without horizontal drilling and hydraulic fracturing, international crude oil prices would have averaged $122 to $150 per barrel in 2013, an increase of $12 to $40 per barrel.

Isakower said the corresponding discount on gasoline and other refined products was estimated to be 29 to 94 cents per gallon. The price decline saved U.S. consumers as much as $248 billion in 2013 and up to $624 billion from 2008 to 2013.

The ICF’s analysis showed that U.S. oil production from wells using horizontal drilling and hydraulic fracturing totaled 4.78 million barrels per day in 2013, accounting for 48 percent of all U.S. production—up from 11 percent in 2008. 

“For the first time in generations, surging domestic production is driving our energy security and providing a crucial buffer against disruptions in Europe, Africa, and the Middle East,” Isakower said.