Despite conflicts in the Middle East, U.S. drivers are seeing gasoline prices plummet thanks to huge increases in domestic crude oil production from hydraulic fracturing, or fracking.
Booming U.S. crude oil production has helped put downward pressure on prices, which have been reflected at the pump. Bloomberg recently reported that the average price for gasoline dropped 4.21 cents over two weeks to about $3.48 a gallon on August 22nd.
According to the Energy Information Administration, gas prices hit about $3.45 on Monday and the average price is nearly 10 cents lower than the same time last year. On the East Coast, prices are more than 15 cents lower than last year and Gulf Coast drivers have seen a more than 14 cent reduction since last year.
Energy analysts say that booming oil production from fracked wells has allowed the U.S. to unlock vast energy reserves and boost production. According to EIA, U.S. oil production has jumped from 5 million barrels per day in 2008 to about 7.5 million barrels per day in 2013. In July 2014, U.S. crude production reached 8.5 million barrels per day, the highest monthly levels since April 1987.
“U.S. total crude oil production, which averaged 7.5 million bbl/d in 2013, is expected to average 8.5 million bbl/d in 2014 and 9.3 million bbl/d in 2015,” EIA notes. “The 2015 forecast represents the highest annual average level of oil production since 1972.”
“It’s crude oil at work,” Trilby Lundberg, president of the Lundberg Survey, told Bloomberg. “The down factors outweighed the up factors. One of the many factors include robust U.S. oil production.”
While the U.S. booms, OPEC crude oil supply has actually been falling for seven of the last thirteen months, according to EIA, due to unrest in Libya and Iraq. EIA expects “continued strong growth in non-OPEC supply to place downward pressure on Brent crude oil prices, causing them to gradually decrease through 2015.”
The energy agency predicts that “total world petroleum and other liquids supply will grow by 1.5 million bbl/d and 1.3 million bbl/d in 2014 and 2015, respectively, while Brent crude oil prices are forecasted to fall from an average of $108/bbl in 2014 to an average of $105/bbl in 2015.”
Virtually all of the increased U.S. oil production comes from fracking on private and state held lands. Fracking involves injecting sand, water and chemicals into underground shale formations to unlock vast oil and natural gas reserves.
Environmentalists say the drilling practice harms air and water quality. Activists have also pressed the industry for more disclosure on the chemicals used in the fracking process.
Despite concerns, there have been no officially reported links between fracking and drinking water contamination or air quality deterioration.
Fracking has helped several states and many localities recover economically due as jobs come back to once depressed rural communities and local governments see rising tax revenues.
Even the sand industry is seeing a boom because of fracking — which uses lots of sand to hold open small underground fissures made during the fracking process.
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