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A shale oil rig near Stanley, North Dakota.

Rigs like this one near Stanley, North Dakota, are an increasingly familiar sight in some parts of the United States, where the pace of oil drilling is at a 25-year high.

Photograph by Karen Bleier, AFP/Getty Images

Mason Inman

For National Geographic News

Published February 10, 2012

The United States has long been seen as a nation in its twilight as an oil producer, facing a relentless decline that began when President Richard Nixon was in the White House. He and every president since pledged to halt the U.S. slide into greater dependence on foreign oil, but the trend seemed irreversible—until now. Forty-one years later, U.S. oil production is on the rise.

U.S. oil fields yielded an estimated 5.68 million barrels per day in 2011—their highest output since 2003, thanks largely to a surge of new production from shale oil that lies beneath the Great Plains. The rush so far is centered in North Dakota, where oil production has quadrupled since 2005, but drilling is set to spread across the prairie and beyond.

(Related: "Shale Oil Boom Takes Hold on the Plains")

"A 'great revival' in U.S. oil production is taking shape," said Jim Burkhard, managing director of the energy consultancy IHS Cambridge Energy Research Associates in testimony last month before a U.S. Senate committee. The resurgence provides the United States a welcome measure of energy security at a time of global economic uncertainty and geopolitical risk, he said.

Yet the U.S. government's own energy analysts and many experts see a limit to this new gusher. The technological advances that have driven the revival—high-volume hydraulic fracturing combined with horizontal drilling—can only squeeze so much more crude out of the U.S. landscape, they say. Projections are that U.S. oil production will never again reach the lofty heights of the 1960s, even without environmental concerns slowing development or hampering industry with new costs.

A chart shows oil production by the United States.

 

But most importantly for U.S. consumers, the new supply is not expected to provide relief at the pump. The price of gasoline, still governed by global geopolitical factors like Middle East conflict, burgeoning economic growth in Asia, and constraints on supply around the globe, is projected to increase at a rate of nearly 2 percent per year. In the United States and elsewhere, the only way to escape the ever-higher price of oil in the future, the experts agree, will be to use less of it.

A Surprising Surge

U.S. crude oil production has dropped by more than a third since its peak in 1970, and as Burkhard said in his Senate testimony, "The long decline . . . was never supposed to end." But instead, since 2008, the United States has seen a greater gain than any other nation in its "total liquid fuels" supply, taking into account the ramp-up of oil alternatives such as ethanol. In a single year, from 2009 to 2010, oil and gas industry spending on U.S. prospects increased 37 percent, to $69.4 billion, he said. The investment reflects high hopes for the future. "The scale of the opportunity to boost oil production in the United States is larger than in most other countries over the next decade," he said.

President Barack Obama highlighted the new oil development in his State of the Union address, saying, "Last year, we relied less on foreign oil than in any of the past 16 years." Indeed, imports have fallen to about 50 percent of U.S. liquid fuel supply, down from 60 percent as recently as 2005, according to the U.S. Energy Information Administration (EIA). EIA's new analysis released last month says that imports are on track to fall to just 37 percent of supply by 2035, significantly less than the agency's projection only a year ago.

A persistent drop in consumption—nearly two million barrels a day since its high point in 2005 due to a slowing economy, efficiency improvement, and consumer scaling back on travel due to high prices-has contributed equally to the decrease in imports.

(Related: "Driving the Limit: Wealthy Nations Maxed Out on Travel?")

When the new oil is considered along with the new natural gas production spurred by the same technology—fracking—some experts have claimed that the United States, the nation that was the birthplace of the oil industry, could become the world's top liquid fuels producer again, surpassing Saudi Arabia and Russia.

(See interactive on fracking technology: "Breaking Fuel From Rock")

But projections by the EIA and the Paris-based International Energy Agency indicate that is unlikely. They expect the U.S. resurgence to hit a ceiling much sooner. EIA projects that the U.S. oil industry will add about 1 million barrels per day to production over the next decade, an increase of about 18 percent. But that's still 30 percent below the 1970 peak, and its forecast to fall slowly after 2020, back down to just over 6 million barrels per day, about 7 percent above today's level.

"It's a modest increase—not a huge increase," said Richard Nehring, founder of the energy consulting firm Nehring Associates in Colorado Springs, Colorado. "The reason is a lot of the new production just replaces old production that's declining." Oil production in California and Alaska, the second and third largest-producing states behind Texas, has been in decline for more than 20 years, he noted.

North Dakota now is fourth in oil production, thanks to the booming development in the Bakken Shale, which sits beneath the western half of the state and neighboring Montana, extending north into Saskatchewan, Canada. The same hydraulic fracturing technology that has unlocked huge new supplies of natural gas across the United States has opened the door to unanticipated production of shale oil, sometimes known as "tight" oil. The oil industry is already leasing land for drilling in a similar formation, the Niobara Shale, beneath Colorado, Wyoming, Nebraska and Kansas. Production in the Eagle Ford shale, in South Texas, is increasing rapidly.

Limits and Doubts

But uncertainties abound regarding this newfound oil supply.  New regulations are expected due to concerns that the water-intensive process, which results in a large amount of polluted "flowback" water rising to the surface, is a threat to groundwater and land. In his State of the Union Address, Obama said he wants companies that drill on public lands to disclose the chemicals they use.

(Related: "A Dream Dashed By the Rush on Gas")

And there are other issues. When first tapped, oil shale wells start off strong, but their production typically declines some 50 percent in the first year, and in later years drops further. "These wells have a pretty steep decline in their first year," said oil analyst John Staub of the EIA. "It requires a high rate of drilling to maintain production," let alone make it grow.

Indeed, the pace of oil drilling in the United States is now at a 25-year high, and EIA projects the rate will rise even higher, pushing oil shale production to nearly 1.5 million barrels a day, or 20 percent of U.S. production. The oil shale boom is expected to max out around 2030.

"Tight oil is a pretty new resource," Staub cautioned, "so there's definitely uncertainty about how widespread it might be. Production could be lower or it could be higher."

To be sure, the EIA expects to see other sources of new oil production in the United States. Although conventional onshore oil production is expected to continue to slide, more oil may be squeezed out of old oil fields, mainly by pumping in carbon dioxide and other newer "enhanced oil recovery" techniques to flush out recalcitrant fluids.

Offshore development, particularly in deepwater, is expected to continue apace after the lifting of the moratorium imposed after BP's 2010 Deepwater Horizon disaster, which resulted in the largest U.S. oil spill ever, in the Gulf of Mexico. The EIA expects some offshore projects to proceed in the Arctic, but these would not be enough to reverse Alaska's decline in production, and its production would fall from 560,000 barrels a day now to less than half that, 270,000 barrels a day, by 2035.

But even with the United States hoping to produce a larger share of the oil it uses, consumers won't pay less. The price per barrel of crude oil, which was between $85 and $110 per barrel in the United States in 2011, is expected to be $120 by 2016 and $145 by 2035, in today's dollars, EIA projects. (That means a whopping nominal price of $230 per barrel by 2035.) In today's dollars, a gallon of gasoline would cost $4.49 by 2035, an average increase of 1.6 percent per year.

Demand for gasoline is soaring in China and India, lifting the price of the globally traded commodity. And outside of OPEC members, the rest of the world's production has reached a peak or plateau, which a boost in U.S. production would do little to change, said David Greene of the U.S. Department of Energy's Oak Ridge National Laboratory in Tennessee.

In the words of International Energy Agency chief economist Fatih Birol, "The age of cheap oil is over." (See: "Has the World Already Passed Peak Oil?")

Looking ahead, the U.S. won't be able to eliminate the cost of oil dependence just by boosting production alone, Greene said. Improvements to cars' gas mileage and other efforts to use energy more wisely would make a big difference. "It doesn't mean that we'll get rid of imports," he said. But if the United States makes efforts both to increase production while decreasing demand, the country could "shrink imports down to a manageable size."

(See: "Iran's Undisputed Weapon: Power to Block the Strait of Hormuz")

Daniel Kammen, director of the Renewable and Appropriate Energy Laboratory at the University of California, Berkeley, said the new drilling boom should not blind the nation to the need to tap other energy resources that don't carry oil's costs.

"The energy mix we have now is heavily domestic due to the expansion of North American fossil resources," Kammen said. "But an arguably larger energy efficiency and renewable energy resource exists in North America." He said that would do more to create jobs and build industry over the long term.

(Related: "Pictures: The Science of Shale Gas")

This story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.

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