If you think there is something going on in West Texas, you may be underestimating how important oil and gas exploration has been in the Permian Basin and how much it is changing the world.
Two data points should suffice to underscore just what is happening. In recent days, federal officials released the earth-shattering news that for the first time in 75 years, the United States became a net exporter of oil. In other words, we now ship more of the black gold overseas than we import. The importance of that is we — the United States — now have the upper hand over the oil-autocratic regimes of the world.
The second data point is connected to the first. The United States is now the largest oil producer in the world. If you think the trade deficit matters, consider these data points will reduce it. And if you think it matters whether we boost our GDP, produce jobs at home, and gain influence for spreading the rule of law and open markets, you should celebrate both of these data points.
And the timing of the news from the Energy Information Administration couldn’t be more fun. OPEC was meeting to decide whether to cut production in order to boost prices.
OPEC members struggled last week to agree on production cuts, but eventually on Friday announced a deal. Oil prices rose. But by Monday, much of those gains vanished as investors worried about a supply glut.
If OPEC cuts production, the cartel risks losing market share to the U.S., where production is amping up. And, as we saw this week, the move might not have the desired effect on prices. That’s because new technology, including fracking and horizontal drilling, allows U.S. oil producers to draw enormous volumes of oil out of mature oil fields.
And those fields hold a lot of oil. News also broke last week of a U.S. Geological Survey report showing West Texas’ Delaware Basin contains twice as much oil as the nearby Midland Basin. The Delaware Basin side of the Permian is the largest continuous oil assessment the government has ever released.
Rather than fret about OPEC, which is far from its glory days of the 1970s, let’s talk about those who are relevant now. If producers are about to turn up the volume on Permian drilling, great. We welcome the jobs and the wealth production. But it’s critical that the region get the support of Texas’ oil and gas regulator, the Railroad Commission.
The commission needs to enforce environmental and safety rules that boost safety and public confidence. As we know from the Deepwater Horizon explosion in the Gulf of Mexico, one accident can halt drilling in an entire region. Even small accidents can prompt local authorities to block production activity.
And as we watch geopolitical history develop in real time, let’s not forget that there’s another side to the equation of net exporter. That’s consumption, where Americans have long been dominant. But consumer power is expected to shift over the next couple of decades, as developing countries industrialize and as people in the U.S. shift toward electric vehicles and renewable energy. As that happens, we’re less dependent on foreign oil.