U.S. Oil Production is a Global Market Stabilizer

Mark Green
Posted January 9, 2024

In case you hadn’t noticed: Oil prices have not skyrocketed in the three months since conflict broke out in the Middle East. While there is concern over hostile forces menacing the vital Red Sea shipping lanes, threatening to restrict tanker traffic, so far, so good. Prices have fallen since early October. Here’s what has happened with the Brent benchmark:

In days after the Hamas attacks in Israel, Brent peaked at $89.41 per barrel on Oct. 19, falling since then to $76.36 on Jan. 8. Similarly, here’s West Texas Intermediate (WTI):

After the Hamas attacks, WTI peaked at $86.30 on Oct. 19 and since then have fallen to $70.93 on Jan. 8.

Thanks, American oil: Perhaps under-appreciated but not unnoticed is the role that record American crude oil production – an all-time high of 13.2 million barrels per day in November – has played in meeting this moment, providing key supply to help stabilize global oil markets amid all that is going on in the Middle East.

API President and CEO Mike Sommers:

“Oil prices have stabilized right now, and it is only because of the American energy revolution. American oil and gas producers should be thanked for ensuring that volatility hasn’t gone in an upward direction.”

Sommers is not wrong. OPEC has been executing a production-cut strategy the past several months. American production is bolstering global supply. Sommers:

“Ten years ago, if this same situation was occurring, we’d be dealing with significantly higher oil prices. We’re producing more oil than this country ever has, and that is a huge advantage to the American consumer and, by the way, to our national security. We don’t have to go and beg, borrow and steal from other countries for energy.”

Let’s quickly point out that record U.S. oil production today is because of investment and development that occurred years ago. To ensure future production can meet future demand, America must increase access to resources, onshore and offshore, and enact policies that support new investment.

That is not happening under Biden administration policies, and that’s concerning for the future. Today’s production must be replaced, because well productivity declines naturally over time, and to account for projected demand increases.

Unfortunately, the administration has pursued a minimalist offshore leasing strategy, with the smallest federal offshore leasing program on record, and it has launched a regulatory onslaught that in many cases needlessly restricts a strategic American energy and security asset.

Sommers:

“If we don’t get the policies right, and if we don’t eliminate this red tape, we’re really sowing the seeds for the next energy crisis. This administration has gone backwards on energy policy. You’re not seeing it at the pump right now, but you’re going to see it in the future if we don’t reverse course.”