The Booming Petroleum Revolution

The United States of America needs oil, and it needs lots of it. Petroleum has been the primary economic and political concern for the USA in the past four decades. Ever since the middle of the 20th century, The United States has always depended on foreign Petroleum to feed its own massive industry. The decline of domestically produced oil after the 1970s has put securing this vital resource on the top of every US government’s agenda. This imbalance of demand and supply has lead to uneasy dependencies on countries such as Russia and Saudi Arabia, as well as decisions to intervene in middle eastern countries for their petroleum supplies.

But all of that is changing. The United States is now the world’s single largest oil producer. Beginning in 2008, the Crude oil production in the United States has seen a steady increase. And in just less than a decade, Domestic oil production has nearly doubled from 2008’s 5 million barrels per day to 9.5 million barrels in 2016. This is due to the result of breakthrough technologies in hydraulic fracturing (aka fracking) that allows the United States to access more of its previously unreachable oil sources. As a result of this boon in oil production, the mainland US gas prices have dropped nearly 40 percent since 2012, and the United States economy was given a significant boost.

More than 70 percent of petroleum is used in some form of transportation, including household cars and planes. It is estimated that this reduction in crude oil prices have saved consumers more than 150 billion dollars per year, much of it being trickled down to other sectors of the economy such as consumer goods. The remaining 30 percent goes primarily into industries, producing products such as leather, solvents, and fertilizers. Thanks to the drop in prices for their raw material, these industries can expect to be more competitive and profitable in the global market. Furthermore, the petrochemical sector in the USA is valued around 185 billion dollars. And the US’s newly secured steady supply of crude oil can be essential to fueling exports, making it the world’s largest producer in such areas.

Depending on the global market and the decisions by United States Lawmakers, this revitalization of the US’s petroleum industry can have far-reaching political and economic consequences. Since 2016 when the US government lifted the ban on crude oil exports (a ban put in place due to the shortage of oil in the preceding years), the United States has again risen to the place as one of the world’s largest oil exporters, along with Russia and Saudi Arabia. This shift in the US’s place on the global Petroleum market has enabled the US government to focus its attention away from the Middle East since its economy is no longer hindered by Middle Eastern nations and the oil regulations of OPEC. One of Trump’s primary concerns is the current US trade deficit, therefore his government no doubt will utilize this domestic petroleum revolution to their advantage. The current US administration is in fact quite pro-Fracking, even more so than during Obama’s administration, so we can expect the crude oil and petrochemical industries to be in a fairly good position for the foreseeable future.

However, with the primary objective to outsource production from the USA, caution is advised so that global opportunities are not lost through the government’s misjudgments. It is essential that as US companies once again become some of the world’s most desirable investments, Trump’s protectionism does not hinder foreign investors from investing in US industries since foreign investments are essential in connecting the US industries to the global market, as well as being necessary to kickstart local businesses.

Will The United States reshape the global market with it’s revitalized industrial might? Or will trump’s isolationist policies be realized on the foundation that is US petroleum? Regardless of the outcome, one thing is for sure: The United States Petroleum Revolution is underway, and it is not to be taken lightly.

– Andy Fan ’19

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