Improving U.S. oil production reaches milestone in October, agency says

November 13, 2013

The United States produced more crude oil in October than it imported for the first time since early 1995, as domestic shale oil output continued to surge and U.S. consumption of petroleum products remained relatively flat, the Energy Information Administration said Wednesday.

The figures mark a milestone in the rebound of U.S. oil production since drillers started using a combination of horizontal drilling and hydraulic fracturing to unlock oil previously trapped in layers of shale rock in states such as North Dakota and Texas. At the same time, gains in automobile fuel efficiency and other areas have been curbing U.S. oil consumption.

The trend is expected to continue for another decade as U.S. domestic oil supplies grow and reliance on imports shrinks, easing one of the main sources of pressure on global oil markets.

For now, however, the United States remains the world’s biggest oil-consuming nation and the largest importer of crude oil. (China is the world’s biggest importer of crude oil and refined petroleum products combined.) Moreover, global crude oil prices remain high by historic measures.

U.S. crude oil production reached 7.74 million barrels a day in October, down slightly from September because of disruptions from Tropical Storm Karen, but up 17 percent from the year before. Aside from September, U.S. production in October was the highest level of any month since May 1989.

Net crude oil imports in October fell to 7.57 million barrels a day, down from 7.92 million barrels in September and down 8 percent from the year before.

The White House sought to take credit for the figures. It issued a statement calling them “a result of both increased production and Administration policies like increased fuel economy standards that cut oil consumption, cut carbon pollution, and cut consumer bills.”

Economists welcomed the figures.

“It highlights the reversal of fortune in our energy sector, that we are increasingly energy independent and prospects are good that we’ll be more energy independent going forward,” said Mark M. Zandi, chief economist of Moody’s Analytics. “It’s one of the reasons to be optimistic about our growth prospects.”

Zandi added that rising domestic oil production “means a smaller trade and current account deficit, which is a big plus for the economy. We’ll be less sensitive to increases in global oil prices.”

According to figures compiled by Zandi, the oil import bill as a percentage of the gross domestic product in the third quarter of this year was lower than any quarter since 1986. The firm estimates that shale oil output will result in an $80 billion reduction in imports this year.

Frank Verrastro, senior vice president and energy expert at the Center for Strategic and International Studies, said the milestone was important, although he warned that higher costs, geological variations and constrained exploration budgets at many independent drillers could make it a “challenge” to meet expectations for future crude oil output growth.

The turnaround in U.S. oil fortunes has been rapid. Five years ago, U.S. oil production hit a 62-year low. Since then, domestic production has increased by more than 50 percent.

Prices remain high. This is the third consecutive year in which the price has hovered above $105 a barrel for crude oil produced by the Organization of the Petroleum Exporting Countries. The U.S. benchmark for crude oil, West Texas Intermediate, has tumbled to about $95 a barrel, down from $110 a barrel in September, but that is still high by historic standards.

Some oil analysts note that prices would be even higher without the increase in U.S. production, which has helped offset oil disruptions in Libya, Iraq and Nigeria and sanctions on Iran.

Steven Mufson covers energy and other financial news.
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