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 and oil development, US crude oil production has more than doubled in a decade. By mid-2019, US production was over 12 million barrels per day, surpassing Russian and Saudi Arabian output as the world’s largest. Academic and business models suggest that oil prices are up to $40 – $50 per barrel lower than they would have been were it not for the US fracking revolution.
The benefits of these lower prices have primarily flowed to China, India, Japan and South Korea, which constitute four of the world’s five largest oil importers (the US itself being one of the top five), largely at the cost of reduced oil revenues to OPEC and Russia. Given Asia’s oil consumption of almost 36 million barrels per day in 2018, the region’s consumers would have saved over $325 billion dollars annually if crude oil prices were lower by just $25 per barrel due to the US production boom. If prices were $50 per barrel lower, the Asian countries would have saved over $650 billion per year.
The benefits to all the world’s oil consumers from higher U.S. production can be estimated based on the fact that world oil consumption in 2018 was about 100 million barrels per day. With a price reduction of $25 per barrel, the daily savings to consumers would be $2.5 billion, or an annual savings of $912.5 billion. If the price reduction was $50 per 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 global recession.