Big oil

Republican talking points assert that four more years of energy administration under Barack Obama will stifle U.S. oil production, while four years under Mitt Romney will liberate it. If the latest oil production forecasts are any indication, U.S. oil wells will shift to high gear no matter what happens on Nov. 6.

A study released Tuesday by the research firm IHS predicts annual U.S. unconventional “tight oil” production—oil extracted from rock formations—will increase almost 70 percent by 2015. This tight oil has largely been rendered accessible by hydraulic fracturing, or “fracking,” the same breakthrough drilling technology responsible for the natural gas production boom of the past several years. It works by pumping sand and fluids underground at extreme pressure, cracking open rock layers and releasing gas and liquid hydrocarbons.

Much of the new oil is coming from shale deposits in North Dakota and Texas. Together, unconventional oil and gas production by 2015 will generate $91 billion in federal and state lease and tax revenues, and add 700,000 jobs to the economy, the IHS report notes. Jobs in the industry pay generously, averaging $35.15 an hour—higher than either the manufacturing or education sectors.

Right now the United States is the world’s third largest producer of crude oil. According to Energy Department forecasts, overall production of crude oil, biofuels, and other liquid hydrocarbons will reach 11.4 million barrels a day next year, slightly below Saudi Arabia’s rate of production.

Americans consume much more than that—18.7 million barrels of oil per day—meaning the United States relies on imports to meet a significant portion of its petroleum needs. But since domestic oil production has increased by one-fifth over the past four years, only 42 percent of U.S. demand will need to be met by oil imports this year, according to government predictions—down from 60 percent seven years ago.

Industry insiders are stunned by the unexpected oil glut. “I’ve been in this business 43 years and this is the biggest change in my career,” Valero Energy CEO Bill Klesse told The Wall Street Journal.

To the frustration of consumers, the surge in oil doesn’t yet seem to have impacted prices at the pump. Although the cost of U.S. crude has fallen 10 percent this year, the price for regular gasoline has increased about 15 percent, due to various market forces and factors in the industry. (As of Wednesday the average was $3.63 per gallon, according to AAA data.)

The situation also creates a seeming paradox for President Obama’s record. Although permit approvals to drill on federal land fell by one-third under Obama, according to the American Energy Alliance, the president can still take credit for presiding over a 20 percent surge in domestic oil production.

But much of the new oil and gas production has occurred on state and private lands, which the federal government has little control over, says Kenneth P. Green, a resident scholar at the American Enterprise Institute.

“When the president sort of claims credit for the rise during his term, he’s being disingenuous,” Green told me. “Because the actions his government has taken, that he really has any control over, are in the opposite direction [of speeding oil production].”

Instead, according to Green, the Obama administration has produced “moratoria on drilling, slower permitting, less leasing, less land being available for leasing in the first place.”

The oil boom has thrived in spite of such obstacles because of high crude prices—which drive exploration—and improved fracking technology. This year, crude oil production will have increased four years in a row, and according to one estimate, the United States might produce 13 million or more barrels per day by 2020. Unless a country like Saudi Arabia or Russia raises its output, that rate would make the United States the world’s leading oil producer.

Gov. Romney would favor such a scenario: He has committed to promoting energy independence as part of his plan to get Americans back to work.

It also seems unlikely that Obama, if reelected, would do anything drastic to inhibit the oil surge. Although his administration has stifled the coal industry through expensive environmental regulations, it has allowed the natural gas drilling boom to flourish. (That boom has created 500,000 jobs since 2010, according to the Dow Chemical Company.) Some experts even believe Obama, during a second term, would finally give his approval to the Keystone XL pipeline being constructed to transport oil from Canada.

With the economy in a rut and unemployment high, either candidate would welcome an opportunity to infuse an industry with jobs and cash. As for the candidates’ efforts to win votes over the next two weeks, Green said it was probably too late for the optimistic IHS energy sector forecast to have a big impact: “We’re past the debates. The window is very short for them to bombard the public with ads.”