Robert Lyman is an Ottawa energy policy consultant, former public servant, and diplomat. His full bio is here.
A number of the candidates to lead the Democratic Party in the 2020 US election, including Elizabeth Warren and Bernie Sanders, have stated that if elected they would immediately seek to shut down all exploration development and production of oil and natural gas on federal lands and all production based on hydraulic fracturing (“fracking”).
As a result of increased fractionation andoil development, US crude oil production has more than doubled in a decade. Bymid-2019, US production was over 12 million barrels per day, surpassing Russianand Saudi Arabian output as the world’s largest. Academic and business modelssuggest that oil prices are up to $40 – $50 per barrel lower than they wouldhave been were it not for the US fracking revolution.
The benefits of these lower prices haveprimarily flowed to China, India, Japan and South Korea, which constitute fourof the world’s five largest oil importers (the US itself being one of the topfive), largely at the cost of reduced oil revenues to OPEC and Russia. GivenAsia’s oil consumption of almost 36 million barrels per day in 2018, theregion’s consumers would have saved over $325 billion dollars annually if crudeoil prices were lower by just $25 per barrel due to the US production boom. If priceswere $50 per barrel lower, the Asian countries would have saved over $650billion per year.
The benefits to all the world’s oilconsumers from higher U.S. production can be estimated based on the fact thatworld oil consumption in 2018 was about 100 million barrels per day. With aprice reduction of $25 per barrel, the daily savings to consumers would be $2.5billion, or an annual savings of $912.5 billion. If the price reduction was $50per barrel, the daily savings for the world’s consumers would be $5 billion, or$1.8 trillion per year. Loss of this savings could hasten the onset of a globalrecession.