U.S. Oil Production Keeps Prices Steady
June 23, 2014
While the recent surge of violence in Iraq has yet to affect the country's oil production, fears of possible supply chain disruptions have caused futures prices to rise, explains Jared Meyer, policy analyst at Economics21.
Gas prices have been high for more than three years. However, price volatility has been low, thanks to increased U.S. oil production, which has risen 50 percent since 2008.
- Advances in drilling technology, including fracking, are responsible for the increased U.S. production.
- Despite Iranian sanctions, civil war in Libya and general Middle East unrest, prices have remained stable.
- According to Ben Montalbano, director of research for the Energy Policy Research Foundation, "Without the increase in U.S. oil production over the past few years, OPEC's excess capacity would be at or near zero. We lost 1 million barrels from Libya, and another 1 to 1.5 million barrel due to Iranian sanctions. Oil prices would likely be $20 to $40 dollars per barrel higher than they are now."
The small impact of these events on oil prices illustrates how important American oil production is to the world market. The U.S. could reduce volatility even further by approving Keystone XL and speeding up the oil and gas permitting process.
Source: Jared Meyer, "Putting Out Market Fires With North American Oil," Economics21, June 14, 2014
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