Washington — President Donald Trump said Tuesday that the "war" on American energy is over in a State of the Union speech given as US crude oil output is set to reach levels not seen in more than 47 years.
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The speech barely touched on energy. Trump did not even mention oil and much of the growth in US output took place while President Obama was still in the White House.
But this month, US production is expected to average more than 10 million b/d for the first time since November 1970. The output jump is already altering US foreign relations and bolstering the Trump administration's calls for energy "dominance."
But those watching the path of US crude production closely remain uncertain over just how much America's relatively newfound supply wealth benefits future diplomatic efforts and how much influence US producers can possibly have over the ever-growing global oil market.
In addition, domestic infrastructure constraints, shifting trade policy, and mounting demand could all blunt the impact of the increase in US output.
So, just what does America's breach of the 10 million b/d mean?
"It's obviously a symbolic milestone, but it symbolizes the re-emergence of the US as one of the world's energy superpowers," said Jason Bordoff, a former energy policy adviser to Barack Obama and founding director of Columbia University's Center on Global Energy Policy.
At last week's World Economic Forum in Davos, Switzerland, Russian oil minister Alexander Novak, Saudi oil minister Khalid al-Falih and US energy Secretary Rick Perry shared a stage.
Rather than a discussion on efforts to keep foreign crude flowing into the US to dampen potential increases in gasoline prices, the panel focused on the role of US shale in "spoiling" efforts by OPEC, Russia and other producers to cut oil output and the likelihood of more US sanctions aimed at Russia's oil sector.
"It's a different conversation now," said Bordoff.
This new status as a global energy superpower has augmented the Trump administration's push to for US energy "dominance," a vague move away from the rhetoric of previous administrations to be energy independent.
And the 10 million b/d oil production milestone gives the US more leverage with Saudi Arabia and other countries in the Middle East, Richard Kauzlarich, co-director of the George Mason University's Center for Energy Science and Policy, said.
"We're not beholden to every political crisis that arises in that part of the world from the cost of our energy," said Kauzlarich, who was the US ambassador to Azerbaijan during the Clinton administration.
US oil output is expected to average 10.01 million b/d this month, climbing to 11.4 million b/d by January 2019, according to S&P Global Platts Analytics projections.
US shale growth, which accounts for the bulk of the domestic output increase, is expected to average about 6.55 million b/d next month, including 2.87 million b/d in the Permian, according to the EIA's latest Drilling Productivity Report. That is up 2.43 million b/d and 1.47 million b/d, respectively, from 2014, according to the EIA.
But the shale output increase still represents just over 2% of total world production, expected to average about 100.3 million b/d this year, and shows that the 10 million b/d milestone for US production is "not as big of a deal as it might seem," said Antoine Halff, former chief oil analyst with the International Energy Agency.
"Sure, the more oil you produce, the more insulated you are against a supply disruption, a physical shortfall in supply," said Halff, who is now director of the global oil markets program at Columbia University's Center on Global Energy Policy. "But it doesn't really isolate you from the global market, the impact of an oil crisis, the price effects, the economic impact, all of that in a globalized world."
The growth in shale may be shifting the US role in the global market as its domestic output matches its previous high in 1970, but it is still importing roughly six times the amount of crude it was back then. In October 1970, for example, the US imported 1.26 million b/d of crude, compared with 7.6 million b/d imported in October 2017.
The US is importing less, of course, than it was in June 2014, when it imported 10.5 million b/d, the all-time high, but it is still dependent on global supply.
"No country is an energy island, no matter what the consumption levels are, no matter what the supply levels are," Halff said. Despite the growth in output, domestic demand will remain roughly double supply, according to EIA projections.
This year, for example, EIA projects crude oil production to average 10.27 million b/d and total consumption to average 20.31 million b/d, including 9.33 million b/d of motor gasoline demand.
"At 10 million b/d [output] America will stand taller than any other major oil producer in the world, but America is also standing in a much deeper hole," said Kevin Book, managing director of ClearView Energy Partners.
Additionally, the growth in shale and the decline in imports may be impairing the Trump administration efforts towards US energy security, said David Goldwyn, president of Goldwyn Global Strategies and a special envoy and coordinator for international energy affairs at the State Department during the Obama administration.
"I think this illusion that shale will fix everything is creating a little bit of amnesia," he said.
Growing domestic supply has compelled the Trump administration to disregard years of diplomatic efforts to maintain stability in producing countries such as Nigeria and Angola.
This, combined with declining investment in exploration and production projects outside of shale plays, could compound a future supply disruption.
No matter how much US production climbs, shale operators cannot still respond rapidly to global supply shocks, according to Bordoff from Columbia University.
US producers may be able to ramp up production in respond to a sudden shortfall in the Middle East or Africa, but it will probably take nine months to a year. Saudi Arabia could likely fill the shortfall within a few weeks, Bordoff said.
This has caused the Trump administration, as well as the Obama administration before, to shy away from significant sanctions on oil sales out of Russia or Venezuela, he said.
This is unlikely to change no matter how much US output ramps up, according to Andrew Holland, a senior fellow at the American Security Project.
"Unless we're going to nationalize large parts of the oil industry or if we're going to start really using the Strategic Petroleum Reserve as a tool of government policy, I just don't see it happening," Holland said.