In 2008, "Drill Baby Drill" was a major rallying cry for Republicans and talk of American energy independence seemed like a pipe-dream. That summer, oil prices peaked at $145 per barrel for West Texas Crude and the media was chock full of stories about "peak oil," featuring predictions of ever-rising energy prices.
What a difference four years makes.
Since 2008, U.S. oil production has risen 25% and America had the largest increase in oil production of any non-OPEC country in 2011. And while America is far from energy independent, oil imports have fallen to 42% of total consumption from 60% in 2005.
WTI oil prices are currently hovering around $83 per barrel, down 20% from their recent peak, and gasoline prices have retreated as well. A slowing economy and Europe's debt crisis are certainly factors in the recent weakness in energy prices but the big picture is a profound change in America's energy production.
"When you look at the sweep of history in terms of energy and oil you see when people think 'we're at the end of the road, we're done,' technology opens up new horizons," says Daniel Yergin, chairman of IHS Cambridge Energy Research Associates and author of The Quest: Energy, Security and the Remaking of the Modern World.
The technology he refers to is, of course, hydraulic fracturing, a.k.a. fracking. While the debate continues over environmental concerns, the reality is fracking has transformed America's energy landscape. Initially used to produce natural gas, the same technology is now increasingly being used to extract oil from "tight" rock formations.
Thanks to development of the Bakken formation, North Dakota is now producing 600,000 barrels of oil per day versus 10,000 barrels a day a decade ago, Yergin notes.
"The prospects for actual energy independence remain elusive," Yergin writes in a recent NY Times op-ed. "But with oil demand in the United States declining, output rising and increasing integration with Canada, the U.S. is certainly on the way to becoming 'less energy dependent.'"
Moreover, increased production in the U.S. and Canada and major offshore development in Brazil means the Western Hemisphere could become far-less dependent on oil from the Middle East, he notes.
Add it all up and America has the cheapest energy in the world and the opportunity to become less intertwined in the Middle East, which would have profound implications for U.S. foreign policy.
Closer to home, IHS estimates such "unconventional" energy production will grow to support nearly 1.5 million jobs by 2015.
As discussed in the accompanying video, the question is whether U.S. policy is dealing with these energy realities.
"I can see our political discourse is playing a game of catch up to recognize our position is different," Yergin says.
With the economy and jobs being the top issue in the 2012 campaign, expect more support for energy production -- from both parties -- even as environmental groups ring alarm bells about the potential risks.
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