The president-elect says he will make America energy-independent. If it is successful in raising crude oil prices, OPEC may help him do just that.
The U.S. has already moved significantly closer to energy independence in recent years. Overall, the net amount of energy brought into the country fell to 11.2% of domestic need in 2015 from 30.1% in 2006, according to Gregor Macdonald, an energy analyst.
Total energy independence may be impossible for the U.S. to achieve, for now, the country is at least pretty close when it comes to oil. And most energy experts now say the biggest barrier to additional increased domestic oil production today is the low price of crude, not government regulation.
Although making it easier to drill new wells would help the industry move quicker to increase production, output from U.S. shale drillers is mostly constrained by the fact that a majority of them wouldn’t make a profit off selling oil for $50 a barrel.
While the president-elect could technically act to raise oil prices, it’s unlikely he would. To rise crude prices is to drive up prices at the pump for Americans, which has never been a popular move and couldn’t possibly pass the smell test in Congress. OPEC on the other hand… OPEC could cut output from its member nations as a way to manage the supply and demand mismatch.
An output reduction by the group would be a massive victory for U.S. oil and gas producers. U.S. firms would increase profits, as well as their market share at the expense of OPEC and any others reducing output. Of course, a U.S. revitalization would only happen if OPEC production cuts actually increase global prices.
In 2008, the U.S. produced five million barrels a day of crude oil compared to 8.7 million barrels in 2015, according to the Energy Information Administration, down from a peak of 9.6 million barrels before the price collapse. And the EIA expects that production to increase substantially through 2040.
The strength of American oil production gives more leeway in foreign policy that challenges OPEC nations.
In the West Texas’ Permian Basin, the U.S. Geological Survey recently estimated that the area’s Wolfcamp Shale alone held 20 billion barrels of oil (In 2015, the United States consumed a total of 7.08 billion barrels of petroleum products).
Today, operators in the Permian Basin produce about 2 million barrels a day. Brigham Resources LLC has suggested that production could increase to 4-6 million barrels per day within a few years since the limitations are more economic than technological.
The U.S. might not be totally energy independent anytime soon, but the threat of an OPEC oil embargo feels less ominous than ever.