Hello and happy Sunday! While AI dominates the column inches of business newspapers across the country, America’s fossil fuel industry has quietly turned into the largest producer of oil the world has ever seen.

Trending well

America’s fossil fuel industry is booming. 

Indeed, while clean energy policies (or, perhaps, a lack thereof) are debated ahead of November’s election, one quiet fact has gone relatively under the radar: no country in the history of our planet has pulled crude oil out of the ground at the pace of the United States over the last 6 years.

Data released by the US Energy Information Administration (EIA) on Monday finds that the US produced the equivalent of 12.9 million barrels of crude oil and condensate per day last year, 28% more than the world’s previous top producer, Russia, and 33% more than even the oil-rich Kingdom of Saudi Arabia.

Reversing the flow

The modern petroleum industry can trace its roots — or wells — back to the 1850s when Edwin Drake dug a ~70 foot oil hole in Pennsylvania and started pumping up to 20 barrels a day of what would come to be known as black gold. But, despite getting a head start on much of the rest of the world, the US was a tiny player in global oil for much of the latter half of the 20th century.

Indeed, were you to transport someone from the oil-importing heyday of the year 2000 to the present day, they’d scarcely believe that the US had become a net exporter of oil (chart here), let alone become the dominant force in a market that — despite the best efforts of renewable scientists — remains the most important global energy source.

Frack to the future

The shale revolution is often credited with much of the progress in America’s newfound oil boom, as hydraulic fracturing (or fracking) unlocked a wave of previously inaccessible, or at least uneconomical, oil and gas reserves. Fracking involves forcing liquid — usually water mixed with sand and chemicals — into fissures in shale rock, cracking and expanding the gaps, allowing the once-trapped oil and gas to find its way to the surface.

As fracking got more efficient, it wasn’t just the crude oil industry that benefited: America’s natural gas production has also exploded over the last 15 years.

Gassed up

Oil and natural gas now join the ranks of heavy machinery, semiconductor chips, and cultural exports like TV & movies, as one of America’s most important trading markets. In December 2023, the US exported ~400bn cubic feet more natural gas than it imported, a dramatic shift from a decade earlier. Driving much of the boom is America’s liquefied natural gas (LNG) export industry, which — as recently as 2015 — basically didn’t exist.

By liquefying the gas, at a frosty -260° Fahrenheit, shipping and storage becomes a lot easier, with the volume of natural gas in its liquid state roughly 1/600th of the volume in its gaseous state — enabling America’s newfound fracking success to be shipped all over the world. 

Upheaval in energy markets, particularly after Russia’s invasion of Ukraine, further boosted demand for American LNG. Indeed, over the past 2 years more than 60% of US LNG exports have found their way to Europe, where buyers have been looking to replace lost supply from Russia. The overall result? From what was pretty much a standing start at the beginning of 2016, America’s LNG industry is now shattering records, with the US becoming the largest exporter of LNG in 2023, unseating Australia and Qatar.

Rigged

One of the most striking things about America’s ongoing fossil fuel boom is that the industry has learned to do more with less.

To get a sense of whether US oil production was likely to rise or fall, you used to be able to look at the number of drilling rigs — the towering steel structures that dig wells and adorn oil-rich regions like the Permian basin in Texas. However, despite the production upswing, the number of crude oil rigs has actually fallen, to about one-third of what it was a decade ago. Advancements in fracking, as well as new “horizontal drilling” techniques — that can spread more than 3 miles underground in one direction — has enabled drillers to increase production without the need for additional rigs.

Independence decade

The “shale revolution" has not only dramatically transformed global oil markets — and made a lot of people a lot of money — it has also shifted the sands that underlie global power structures. Although it would be a gross oversimplification to suggest “America doesn’t need anyone else’s oil or gas”, the fact remains that a thriving energy sector gives American leaders a stronger hand when negotiating on the world stage, as well as the ability to step in for allies when supply from volatile regimes is lost or blocked.

We’d be remiss not to mention the elephant in the room: that global temperatures are breaking records at a tiring pace (chart here), just as America’s fossil fuel sector expands. Indeed, in addition to the emissions from the burning of fossil fuels, fracking itself is also notoriously thirsty work. Energy giants are now drilling not only for oil, but also for the billions of gallons of water they need to frack effectively. Furthermore, on Wednesday a new study published in Nature found that the methane emissions — that are responsible for around one-third of global warming — from US oil and gas producing regions were roughly triple previous government estimates. A change is gonna come, but it’s coming slowly.

Thanks for reading.