Report: $150 Per Barrel Oil Without U.S. Fracking Boom
The price of fell from about $100 per barrel to $80 per barrel in a matter of months, bringing with it lower gasoline prices for drivers and a modest boost to the economy ahead of the holiday season.
This is all thanks to the advent of hydraulic fracturing, or fracking, and horizontal drilling in the U.S., without which gasoline prices would be nearly one dollar higher and oil would cost as much as $150 a barrel, according to a recent report.
Energy experts at ICF International estimate that “that international Brent crude oil prices would have averaged $122 to $150 per barrel in 2013” without the massive increases in oil production from fracking. Instead oil prices have fallen to around $80 per barrel and are projected to fall even further — maybe even to $60 per barrel.
“Given the international nature of U.S. petroleum product movements, ICF also estimates that 2013 U.S. petroleum product prices were between $0.29 and $0.94 per gallon lower than they would have otherwise been without” fracking, ICF reports.
“This reduction in petroleum product prices have saved U.S. consumers an estimated $63 to $248 billion in 2013 and estimated cumulative savings of between $165 and $624 billion from 2008 to 2013,” ICF notes in its report that was prepared for the American Petroleum Institute — the country’s main oil and gas lobbying group.
Fracking is a well-stimulation process in which water, sand and some chemicals are injected into shale formations deep underground to extract oil and natural gas. This practice, combined with horizontal drilling has revolutionized the U.S. oil and gas industry and put the country on the path to be the world’s largest oil and gas producer.
Oil production from shale formations have shot up from a mere 750,000 barrels per day in 2008 to a whopping 4.78 million barrels per day in 2013. In November 2014, oil production from the seven major U.S. shale plays reached 5.13 million barrels per day, according to government data.
The shale revolution has not only been a boon for drivers and oil companies, it’s also revitalized local economies and small businesses where drilling is taking place. A Manhattan Institute study found that between “2007 and 2011, per-capita income rose by 19 percent in Pennsylvania counties with more than 200 wells, by 14 percent in counties with between 20 and 200 wells, and by 12 percent in counties with fewer than 20 wells,” according to U.S. News & World Report.
A Duke University study found that “most county and municipal governments have experienced net financial benefits.” But the Duke study noted that “some in western North Dakota and eastern Montana appear to have experienced net negative fiscal impacts” and other “municipalities in rural Colorado and Wyoming also struggled to manage fiscal impacts during recent oil and gas booms, though these challenges faded as drilling activity slowed.”
Fracking has been heavily criticized by environmentalists who say it harms water quality and contributes to global warming. Eco-activists have been pushing local fracking bans as a way to halt drilling in some states as efforts to get statewide bans on the practice have largely failed.
Voters in Denton, Texas recently approved a measure to ban fracking within its local borders. The town, which sits atop the Eagle Ford shale formation, approved the ban with 59 percent of the vote.
“The democratic process is alive and well in Denton,” Denton Mayor Chris Watts said after the vote. “Hydraulic fracturing, as determined by our citizens, will be prohibited in the Denton city limits. The City Council is committed to defending the ordinance.”
The oil and gas industry has vowed to challenge the legality of the ban in court, arguing the local ban violates state laws meant to facilitate oil and gas production.
“There’s a lot of fears that are not justified or not based in science and fact” about fracking, Texas Oil and Gas Association attorney Bill Kroger told the Los Angeles Times. He said the battle over the ban “is really about who should make decisions about how we not only protect mineral rights, but the public.”
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