Oil prices continue to plunge today despite the beheading of another western hostage by the Islamic State, tensions between Russia and the West, and mayhem in Libya. As Quartz has reported, one of the main reasons is surging US oil production, which has made up for supply disruption almost barrel for barrel—and is also a bad sign for the leaders of petrostates.
Now we have an estimate of where oil prices might have been absent the American oil boom—a sobering $150 a barrel, former BP CEO Tony Hayward told the Financial Times (paywall).
That’s 55% higher than the current benchmark price of $96.27 that was trading in Asia this morning. If Hayward’s number is right, it means that the US boom is saving the global economy about $4.9 billion a day in oil spending. Global consumers currently demand about 92 million barrels of oil a day, and without the extra US supply the market would be about 3 million barrels short, sufficient to send traders into a frenzy bidding up the price.
Since 2011, US oil production has soared by about 3 million barrels a day, to about 8.5 million barrels, thanks mostly to the technique of hydraulic fracturing in shale oil fields. That is just a bit less than the volume of oil production that has been persistently off line since the 2011 Arab Spring ushered in the three-year wave of unusual oil disruptions the world has experienced. When you add in a 1-million-barrel-a-day rise in Canadian oil production in the same time period, North America as a region has swamped the lost barrels.