The noise created by a small, independent oil and gas company some 20 years ago has become the mighty roar of thousands of oil and gas companies across the United States exploring and producing near record amounts of oil last year. The rate of increase in U.S. oil production did set a record in 2012.
U.S. crude oil production grew by more than one million barrels a day (b/d) to 8.9 million barrels per day, a 14 percent increase, surpassing the previous record of 640,000 b/d increase set in 1967.
Independent oilman George Mitchell began poking around and drilling wells in shale formations north of Fort Worth in the 1980s. It took Mitchell and his company several years and many experimental wells to find the right combination, but they eventually found it.
The impact of this large increase in production has made some members of the Organization of Petroleum Exporting Countries (OPEC) nervous about their role in the global energy game.
African OPEC members, Algeria and Nigeria, seem to be the most vocal and most vulnerable. OPEC members Iran and Venezuela are in the high-cost production category, too.
However, countries such as Saudi Arabia show little concern. As the world's leading producer at 11.5 million barrels per day, Saudi Arabia has the ability to cut and increase production as it sees fit. Its cost of producing oil is much lower than other OPEC members.
Oil production in the U.S. peaked in 1970, and declined steadily for about 40 years. The perfection of horizontal drilling and combining multiple fractures of shale downhole released the ability of the industry to produce unthinkable amounts of natural gas and crude oil.
It's an amazing story, because just a few years earlier many experts in the business of forecasting oil and gas trends believed in the "peak oil" theory. Peak oil believers thought that the world had reached its peak oil production several years ago. Today, the industry is amazed that the U.S. turned around its oil production and even increased it one million barrels per day.
Crude oil is being produced in record quantities in places such as North Dakota, Ohio and South Texas. The Permian Basin of West Texas and New Mexico has become even more prolific.
The beauty of all of this is that the technology was developed while drilling for natural gas, which is much easier to extract from the low permeable shale. In 2008, prices for natural gas and crude oil both collapsed. Crude oil bounced back. Natural gas is still trading at the low price of about $4 per thousand cubic feet (Mcf).
Exploration for natural gas declined along with prices. However, the future looks bright for natural gas. It has a high energy content, it is the cleanest of the fossil fuels and it has large domestic supplies.
The increased energy production in the U.S. has positive economic and national policy implications. The decline in imported oil will help the nation's balance of payments. Domestic crude oil and natural gas will generate all kinds of positive employment and financial considerations. State, federal and local tax collections will increase.