U.S. crude production rose above 8 million barrels a day last week for the first time in almost 25 years, cutting dependence on foreign oil and pushing the country toward energy independence.
Output climbed 0.6 percent, or 45,000 barrels a day, to 8.019 million barrels a day last week, the Energy Information Administration (EIA) said Wednesday. That’s the most since January 1989.
“It’s a tremendous shift,” said Stephen Schork, president of the Schork Group, an energy consulting firm in Villanova, Pa. “Production will continue to grow in North America, and North America will continue to become less and less dependent on foreign sources of oil.”
U.S. oil production is growing at the fastest pace in history, boosting fuel exports and reducing reliance on foreign fuel, according to the EIA. The boom will make the country the world’s largest producer by 2015, five years sooner than last year’s forecast, the International Energy Agency in Paris said this month.
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In the U.S., the average price of gasoline has tumbled 49 cents from its peak this year to $3.29 a gallon, putting it on track for the lowest average since 2010, according to AAA. Because many Americans have had no pay raises, whatever money they’re saving on gas has freed up a bit more for other purchases.
And history shows that when gas prices drop, consumers become more likely to splurge on dinners out. Impulse buys at the mall seem like less of a stretch. More people buy a gas-station gift card after fueling up.
Many retail analysts have forecast a ho-hum sales gain of around 2 percent this year; others predict an increase of up to 3.9 percent. But cheaper gas could send holiday sales shooting above 5.4 percent, analysts say.
“Every little thing moves the needle at this point,” said Carl Riccadonna, senior U.S. economist at Deutsche Bank. “The benefit at this time of the year certainly helps retailers, since it is not spread evenly throughout the year.”
Tom Kloza, chief oil analyst at the Oil Information Service, foresees the average price drifting down, as it typically does this time of year, to as low as $3.05 by year’s end.
For retailers, the best-case scenario would be for the national average to breach $3 a gallon, a psychological barrier that could accelerate spending.
Cheaper gas could help build on the momentum of 2 million more Americans finding jobs this year. It might also help shore up consumers’ fragile confidence in an economic recovery that’s lumbered along for 4½ years.
Dip in imports
Imported crude and petroleum products will dip to 28 percent of domestic demand next year, the lowest since 1985 and down from a peak of 60 percent in 2005, the EIA said in its Nov. 13 Short-Term Energy Outlook. Refined product exports have advanced 15 percent so far this year, EIA data show.
Advances in horizontal drilling and hydraulic fracturing, or fracking, have boosted output from dense rock formations such as the Bakken shale in North Dakota and the Eagle Ford in Texas. The techniques allow producers to bore sideways through the richest layers, then use explosives followed by a high-pressure stream of water, sand and chemicals to crack open the deposit and free the trapped oil and gas.
Domestic production will average 8.5 million barrels a day next year, according to the EIA, the statistical arm of the Energy Department.
The surge has led domestic producers such as Harold Hamm, the CEO of Continental Resources, to push the U.S. to lift restrictions on oil exports, which were imposed by Congress after the 1973 Arab oil embargo. Crude sent to Canada, which is allowed under license, reached a record 132,000 barrels a day in April, EIA data show.
Taking into account all energy sources, including natural gas, petroleum, nuclear and renewables, the U.S. met 86 percent of its needs in the first eight months of 2013, on pace to be the highest annual rate since 1986, EIA data show.