How The Fracking Boom Postponed OPEC’s World Domination

A decade ago it appeared that OPEC was in the driver’s seat of the global oil markets. Then the fracking revolution happened, and changed everything.

Oil Supply Growth 2008-2017

Of the 10.3 million BPD of new oil production since 2008, the U.S. supplied 6.2 million BPD (60%). The world’s two other major oil-producing countries, Saudi Arabia and Russia, saw their production increase by 1.7 million BPD and 1.2 million BPD respectively since 2008.

OPEC overall increased its production by 3.6 million BPD since 2008, primarily as a result of production growth in Saudi Arabia, Iraq, and Iran. But OPEC’s gains were limited by production declines in Venezuela, Libya, and Nigeria. There were also regional production declines in Europe, Asia, Africa, and South and Central America.

Also notable is that Canada and Mexico are major oil producers (although Mexico’s production has been declining). Overall, North America supplied 20 million BPD of the world’s oil in 2017 (22%). This was ahead of every other region of the world except for the Middle East, which produced 31.6 million BPD, or 34.1% of the world’s total.

According to the BP Statistical Review, the U.S. now leads both Saudi Arabia and Russia in crude oil production. This is in part because BP’s definition of “oil” includes natural gas liquids (NGLs), which grew by about two million BPD in the U.S. as natural gas production boomed. Without the NGLs, the U.S. would probably have been behind Saudi Arabia, but probably not Russia, in total oil production.

It is hard to overstate the consequences of the fracking revolution, because the U.S. oil production surge broke OPEC’s stranglehold on global oil prices. But U.S. tight oil production will inevitably slow and once again begin to decline. The key questions are how soon this will happen, and whether a return to >$100/bbl oil — and in turn OPEC’s stranglehold — awaits that inevitability.

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