By Rob Nikolewski │ New Mexico Watchdog
If you think the price of gas is high, imagine paying up to $6 a gallon.
That’s what energy expert Dan Steffens thinks the price could be if not for the domestic oil boom.
“With what’s going on the Middle East, I think it would five or six bucks (a gallon),” said Steffens, president of the Energy Prospectus Group out of Houston. “If it wasn’t for the shale revolution, you’d be in big trouble.”
Technological breakthroughs in recent years have led to an explosion in the energy industry in the United States.
Just how did fracking save American drivers from $6 gas?
Extraction from shale rock formations in places such as the Bakken Formation in North Dakota, the Eagle Ford Formation in south Texas and the Permian Basin in west Texas and eastern New Mexico has been so dramatic that, last month, the International Energy Agency announced the U.S. surpassed Russia and even Saudi Arabia in oil production.
A report from the commodities division of Bank of America says daily output in the U.S. exceeded 11 million barrels in the first quarter of this year.
“If we didn’t have the oil industry and oil and drill activity, the economy would be much, much slower,” Joseph Dancy, investment partner at LSGI Advisors, Inc., based in Dallas, told New Mexico Watchdog.
Drivers have been grumbling about the increase in the price at the pump. Here’s a look at the average price per gallon for the Fourth of July in the U.S. since 2008:
But the message from energy experts? It could have been much worse.
Violence in Mideast nations such as Syria, Iraq and Libya, as well as political unrest in the oil-rich nations of Nigeria and Venezuela, might have sent the price of gasoline through the roof. But benchmark U.S. crude was at $104 a barrel Monday and Brent crude, a benchmark for the international market, was down 33 cents last week to $110.91 a barrel in London.
“There’s no question that this his new-found abundance of oil from shale plays is having a significant impact on the global market,” said Bernard Weinstein, associate director at the Maguire Energy Institute at Southern Methodist University.
“We’d probably be at $150 oil with this thing in Iraq going on,” Steffens said.
“While the situation in Iraq seems to be getting worse, oil prices have actually fallen (in some sectors) because the markets now understand that Iraq could go totally off the market and there’s still plenty of oil going around, not just here in the United States,” Weinstein said. “The world is swimming in oil right now.”
The political irony is that President Obama is a beneficiary of relatively stable gas prices, even though the energy explosion is happening in red states such as North Dakota and Texas, where Obama lost to Republican presidential nominee Mitt Romney in 2012 by nearly 20 points and more than 15 points, respectively.
“It’s a wild boom and it’s all generating economic activity for a president who really does not favor the oil and gas sector at all,” Dancy said. “It is really ironic.”
But environmental organizations lament, rather than celebrate, the shale boom because energy producers use hydraulic fracturing — fracking — to get to the oil and natural gas under the earth’s surface.
“We can’t afford to support the extractive industries,” said Eleanor Bravo, senior organizer for Southwest Food and Water Watch. “The earth and the environment cannot afford to be burning any more fuel. Plus, the fracking process, when you count in the amount of methane that escapes during the extraction process, it’s as dirty or dirtier than burning coal.”
But there’s little indication the boom will stop anytime soon.
According to Weinstein’s statistics, there’s been a 60 percent increase in domestic oil production in the past six years, and Dancy cites figures showing global demand increasing 1 percent per year.
“If you look at the amount of refining exports that are going out of the United States, they’re hitting 20- and 30-year highs,” Dancy said.
Contact Rob Nikolewski at [email protected] and follow him on Twitter @robnikolewski