Remember “peak oil?” The theory that we would one day run out of oil – just a few decades ago people were predicting it would happen in our lifetimes – has been, along with “global warming,” the primary justification for billions of dollars in government largess dumped on the so-called “green” or “renewable” energy industry.
U.S. oil production grew more in 2012 than in any year in the history of the domestic industry, which began in 1859, and is set to surge even more in 2013. Daily crude output averaged 6.4 million barrels a day last year, up a record 779,000 barrels a day from 2011 and hitting a 15-year high. It is the biggest annual jump in production since Edwin Drake drilled the first commercial oil well in Titusville, Pa., two years before the Civil War began (see chart above).
The U.S. Energy Information Administration predicts 2013 will be an even bigger year, with average daily production expected to jump by 900,000 barrels a day. The surge comes thanks to a relatively recent combination of technologies—horizontal drilling and hydraulic fracturing, or fracking, which involves pumping water, chemicals and sand at high pressures to break apart underground rock formations.
Together, they have unlocked deposits of oil and gas trapped in formations previously thought to be unreachable.
That has meant a resurgence of activity in well-established oil regions, such as West Texas’s Permian basin, as well as huge expansions in areas that had been lightly tapped in the past, such as North Dakota’s Bakken shale region. The Bakken has gone from producing just 125,000 barrels of oil a day five years ago to nearly 750,000 barrels a day today.
The benefits of the surge in domestic energy production include improving employment in some regions and a rebound in U.S.-based manufacturing.
The “peak oil” people were just another generation of Malthusians once again proven wrong because they underestimated mankind’s capacity for innovation and invention. Just as we haven’t outgrown our capacity to produce food, as Thomas Malthus argued in the 17th and 18th centuries, because we figured out how to get better at farming we aren’t running out of oil because we figured out how to reach oil and gas reserves we never could before.
Inventions like hydraulic fracutring and horizontal drilling have opened up centuries worth of oil and gas reserves. Free market innovations have carried the day over the grim assurances of technocrats and the politicians who listened to them.