U.S. oil imports from OPEC were at one of their highest monthly levels in 2008. Since then, the hydraulic fracturing boom has increased U.S. oil production, making the nation less vulnerable to overseas oil supplies. U.S. oil imports from OPEC were down almost 60 percent in October 2014 from a monthly high in January 2008.[i]
Due to Canada’s vast oil reserves, Canadian oil imports have also increased. They are at one of their highest levels ever, totaling 3.5 million barrels per day in October 2014—0.8 million barrels per day higher than our imports from OPEC–based on the most recent data from the U.S. Energy Information Administration (EIA). Clearly, if the United States continues to need oil imports–which forecasters expect–it is much better to import from our friendly northern neighbor than from overseas.
President Obama is apparently not seeing this trade-off, as he intends to veto any bill from Congress approving the northern route of the Keystone XL pipeline.[ii] If approved now, the Keystone Pipeline would be able to bring 830,000 barrels of oil a day from Canada to the United States in just a few years, when U.S. consumers will most likely see oil prices going up. EIA is expecting oil prices to average $71 a barrel in 2016, up from a forecast of $55 a barrel in 2015.[iii]
U.S. Oil Production
Forecasters are expecting U.S. oil production to continue its climb, reaching 9.5 million barrels per day in 2016—0.8 million barrels a day higher than expected 2014 production. While that growth in oil production is not as fast as the nation has seen in the past 3 years, it is still a major increase given the slack in oil prices that have fallen 60 percent since June of last year and continue to tumble. This phenomenal growth in oil production has been due to hydraulic fracturing coupled with horizontal drilling technology.
Hydraulic fracturing involves injecting water, sand, and some chemicals into underground shale formations to extract oil and natural gas. The hydraulic fracturing process has come under attack from environmentalists who say it contaminates groundwater and harms air quality. However, studies by the U.S. Environmental Protection Agency (EPA) and the Department of Energy (DOE) have shown no evidence linking the process to groundwater contamination. The drilling of natural gas and oil wells is not a always a perfect process, and from time to time, over the decades there have been problems with well casings. Yet there has not been a single problem with hydraulic fracturing. Both the EPA and DOE have found hydraulic fracturing to be environmentally safe.[iv]
The U.S. shale oil explosion has resulted in a collapse in oil prices and, consequently, a huge decline in gasoline prices, which are now below $2 a gallon in some areas. That has put more money into consumers’ pocketbooks, aiding the U.S. economy.
U.S. Oil Imports
U.S. net oil imports (imports minus exports) are now at their lowest level since 2005, and represent just 27 percent of U.S. petroleum demand—the lowest share since the mid-1980s.
U.S. oil imports from OPEC fell in October 2014 to its lowest level since April 1987. Oil imports from OPEC in October 2014 at 2.6 million barrels per day were 59 percent below the 2008 monthly peak of 6.4 million barrels per day that occurred in January.
Canada remains our largest non-domestic supplier of petroleum, providing 3.5 million barrels per day in October 2014 based on the latest data from EIA—0.8 million barrels a day more than OPEC. Canada has the oil reserves and the where-with-all to continue supplying oil to the United States, but infrastructure and political problems remain in the way.
Keystone XL Pipeline
President Obama has taken six years to determine that he cannot yet make a decision regarding the Keystone XL pipeline, which will be able to move 830,000 barrels of oil a day to the United States and further reduce our imports from overseas countries that are not always friendly to us. What’s more, President Obama has indicated that he will veto any bill that Congress sends to him approving the Keystone pipeline, despite all hurdles to its construction being removed. Last week, the Nebraska Supreme Court voted to allow the Governor’s decision to approve the proposed pipeline route through the state.
President Obama’s environmental issues with Canadian oil sands do not substantiate his numerous delays in making a decision on the Keystone Pipeline. Even if the pipeline is never built, Canada’s oil will still be produced and sold. Despite the 60-percent drop in oil prices, oil sands production has continued in Canada and production is expected to increase by 6 or 7 percent this year. Canadian oil sands are getting to market by existing pipelines, rail and ship, and Canada is considering new pipelines that would transport the oil to Canada’s east and west coasts.[v]
Hydraulic fracturing and U.S. oil production have reduced our need for oil imports. Oil imports from OPEC have dropped by almost 60 percent. Our net oil imports are now at just 27 percent of our petroleum demand. Due to American ingenuity, the United States has become more energy secure. Increasing our oil imports from Canada and decreasing them from overseas is another way for the United States to become even more energy secure. However, the President has indicated that he will veto any bill that Congress passes approving the Keystone XL Pipeline, despite pipelines being the safest means of moving oil. President Obama’s veto, were it to occur, would simply mean that the President is against making the United States less dependent on overseas oil.
[i] Daily Caller, US Oil Imports From OPEC Down 60 Percent From 2008 Highs, January 9, 2015, http://dailycaller.com/2015/01/09/us-oil-imports-from-opec-down-60-percent-from-2008-highs/
[ii] CNN, Majority of Americans Back Keystone Pipeline, January 15, 2015, http://www.cnn.com/2015/01/15/politics/poll-majority-of-americans-back-keystone-pipeline/
[iv] Daily Caller, Study Shows Fracking Does Not Harm Drinking Water, September 16, 2014, http://dailycaller.com/2014/09/16/government-study-once-again-shows-fracking-does-not-harm-drinking-water/
[v] Bloomberg, Approve Keystone and Move On, January 12, 2015, http://www.bloombergview.com/articles/2015-01-12/just-say-yes-to-keystone-xl-pipeline-and-lets-move-on