But instead of reaching “energy independence” — where the United States wouldn’t need to purchase foreign oil — Nixon’s goal of oil self-sufficiency began to look more and more distant.
But that was before the shale revolution.
Recent technological advances in drilling and hydraulic fracturing in shale plays, such as South Texas’ Eagle Ford Shale, have touched off a renaissance in oil production.
In January, domestic oil production jumped above 7 million barrels a day for the first time in 20 years, touching off renewed talk of reaching energy independence. Today, many experts are divided only as to when oil self-sufficiency will occur.
Still others say it’s not realistic to suggest that the nation will stop importing oil entirely. It doesn’t take into account the nation’s dependence on the broader global economy, which relies on the sometimes shaky security of oil exports from the Arabian Gulf.
And reaching energy independence assumes that U.S. oil production will continue to rise, a situation that in itself could dampen oil prices and thus, drilling.
Yet talk of U.S. oil self-sufficiency has prompted renewed excitement. It started in November, when Paris-based International Energy Agency predicted that the United States would surpass Saudi Arabia as the world’s biggest energy producer by 2020.
The agency, which provides policy advice to 28 member nations, further predicted that North America would be come a net exporter of oil in 2030 and the United States would reached energy independence by 2035.
A somewhat more tempered prediction came from the U.S. Energy Information Administration, which estimated that the nation will be dependent on oil imports until 2040.
At the same time, though, the EIA recognized the surge in domestic oil production, predicting a sharp rise over the next decade. The EIA also estimates that net imports of liquid fuels will fall to 6 million barrels a day by 2014, a level that would represent a 25-year low.
“We see foreign oil imports declining, but not disappearing,” said Jim Burkhardt, head of oil market research at the consulting firm IHS/CERA.
But there’s no question that the growth in domestic oil production “is truly, truly exceptional — and in a global historical context,” he said. Iran had a similar boom in oil production in 1979 and Saudi Arabia from 1972-74, “so that just shows you how rare it is. That’s why net oil imports are down 40 percent, and that’s why we’re even entertaining the question as to why we could become energy independent.”
Oil imports “may not hit zero,” Burkhardt added, “but we’re going to see a trend where North America will move toward greater self-sufficiency in oil production.
Over the next 20 years, he said, “most of our foreign oil is going to come from Canada, and some from Mexico as well.”
Whenever oil self-sufficiency may occur, U.S. Rep. Henry Cuellar, D-Laredo, sees big benefits for Texas.
“Domestic oil and gas production is driving job growth here in Texas,” he said. “We’re seeing that in the Eagle Ford Shale.” Cuellar’s 28th congressional district includes counties in the shale where drilling is booming.
Cuellar noted that the nation’s trade deficit plummeted from $48.6 billion in November to $38.5 billion in December, “and a large chunk of that has to do with falling oil imports.”
A shrinking trade deficit means more exports, and “that means more jobs here and fewer dollars leaving the U.S.,” Cuellar said. Yet not every expert is touting the benefits of oil self-sufficiency.
“The concept of energy independence is an odd concept,” said Kenneth Medlock III, senior director of the Center for Energy Studies at Rice University in Houston.
The price of oil must be high enough to support growth in domestic production. At today’s prices, U.S. production is rising.
And if, say, 10 million barrels of foreign oil aren’t imported, “that will have an impact on the global price,” pushing the price down, Medlock said, and some drilling activity would be curtailed.
If the price of oil should drop to $70 or $80 a barrel, “then the concept of complete independence is a little fleeting,” because domestic production could drop.
And Medlock noted that even if the nation reaches oil self-sufficiency, major refinery outages would lead to spikes in gasoline prices.
“The point is, even if you are energy independent,” Medlock said, “you will still have price fluctuations related to infrastructure issues.”
And if there are disruptions in the Middle East and the supply of oil is pinched, the price of oil would soar.
Translation: Americans shouldn’t expect energy independence to equal relief from surges in gasoline prices.
“We’re not going to be immune,” Medlock said, “because it’s still a global market.”