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by Rod D. Martin
October 21, 2015
U.S. oil output isn’t dropping. And that is…more than a little interesting.
Given the collapse in oil prices — very recently we were told that $250 oil would be the new normal — many predicted that U.S. frackers would be run out of business. That was certainly Saudi Arabia’s intent when it opened oil’s floodgates last year. The operative theory was that the frackers’ higher production costs would bankrupt them at $50 a barrel.
But it didn’t, even as prices dropped 50 percent, 25 percent of that just in the last quarter. And then we began to hear that the number might be $40. And then $30. Some are now saying $20.
U.S. rig count is indeed down by more than half. To that degree, the Saudi’s bet payed off. And yet, U.S. oil output is within 3 percent of its 40-year high, and a report out two weeks ago shows that U.S. production actually rose 1 percent in July to an incredible 9.4 million barrels a day. A more pessimistic writer frets that that OPEC is “crushing the U.S. oil boom,” and that production could drop as low as 8.86 million barrels per day next year, purely due to price, not supply.
As low as 8.86 million. It was 5 million in 2008. And everyone thought the oil was running out.
How is this happening? Innovation. Just as the fracking boom itself is a result of a technological breakthrough that left “peak oil” theory in shambles, America’s oil output stubbornly refuses to decline because its producers are getting twice as much out of each well.
This is principally due to a new technique: using more sand to increase production and profitability. Sand has always been part of fracking. Drillers pump water into the well, fracturing the shale. Those fractures are kept open with sand, allowing the oil to be extracted.
It turns out that upping the amount of sand produces fracking on steroids. According to one study, the injection of additional sand can increase output by as much as 300%. It’s no wonder, then, that sand usage has increased from less than 1,000 pounds per foot in 2012 to more than 1,500 pounds now.
Image credit: Bloomberg
After the selloff of crude oil, prices for sand plummeted by 30 percent. This left a lot of the early boom’s sand investors gasping, but it also made it that much easier to use more sand.
In an interview with Bloomberg Business, one oil man was candid about his limitations and goals: “I can’t control the price of the commodity… The only thing we can do is get better and faster and cheaper. There’s a general correlation that more sand equates to a better well.”
Hydraulic fracturing continues to revolutionize the oil industry, increase output, maximize profits, and make the United States the leader in energy exploration and extraction. Technology and innovation — not reduction in living standards and leftist lectures on “limits to growth” — continue to reduce our dependence on foreign oil and, more to the point, make life better for all of us.
This is a disaster for all the right people. OPEC in particular is broken: never again will it be able to arbitrarily raise global energy prices, not when American producers can flood the market just as easily (and with the Saudi government’s budget keyed to oil above $100, far more profitably). If the Saudi situation is difficult — its budget deficit is now 20% of GDP — even worse are the outlooks for Russia and Venezuela. And with Iran’s production coming back online, their trend lines only get worse.
Yes, individual U.S. producers and investors are hurting. They hurt in 1985 too. America as a whole did not: it was just beginning its longest-ever peacetime expansion, in no small part because of those same low oil prices. Energy is just one part of America’s highly diversified economy. A handful of majors with relatively few wells can keep Russia on the ropes for years to come.
The real point is, as I’ve said for many years, there is no long term shortage of oil. Since the 19th century, government estimates have consistently prophesied the imminent depletion of the planet’s second most abundant liquid. As far back as 1874, Pennsylvania’s state geologist fretted that America had only four years of oil remaining. 1878. He wasn’t the first to say it. He was far from the last.
When demand increases and prices rise, companies explore for more. As they do, they innovate: they find new ways to do more with what they find. But just as Malthus predicted imminent global starvation in 1798, and just as 230 years later Paul Erlich promised global famine by 1980 — words he wrote at the height of the Green Revolution — the left forever underestimates the power of human ingenuity to devise new technologies and expand supply.
They were wrong in 1798, they were wrong in 1968. And the Peak Oil crowd which was so very loud in 2008 is suddenly very, very quiet.
Rod is one of our nation’s leading minds. He’s smart, original, and very committed—a combination that one rarely finds.
Rod Martin and [former Howard Dean campaign manager] Joe Trippi are America’s two foremost experts on online politics.
Rod Martin is a Reaganite-Thatcherite conservative…[and] a man who has spent much of his life ministering to and working for the benefit of others. I know Rod as an advocate for freedom, a leader who understands the real changes we need in Washington, and who has the drive and ability to make those changes happen.
Rod Martin is the kind of dynamic leader who has the knowledge, ability and experience to lead us successfully into the 21st Century. His vision for America is compelling.
Rod Martin literally wrote the book on excellence. Humble yet brilliant, a man of love and compassion, with penetrating clarity he illuminates the world around us, and we are both stirred and enlightened.
Rod Martin is a born leader and an outstanding political mind. Anyone who takes him on is going to have a serious fight on their hands.
Rod Martin is a man of uncommon vision and character. Ever since I first worked alongside Rod in the early days of PayPal, I’ve been struck by his powerful vision for the future. Rod understands the intersection of technology, politics and culture in a way that few others do.
Rod Martin wears with uncommon grace an uncanny ability to link his vigorous faith to the practical challenges of both the business world and the political arena. Yet the respect he shows for others carries a warmth and modesty that are both too rare among those who are strong advocates of feisty positions.
America badly needs more leaders who really get the future. We need more Rod Martins.
Rod Martin is a modern day philosopher-statesman. He is a capitalist intellectual, a conservative iconoclast, a gentle adversary and a kind prophet. He inspires us towards a fresh national vision built upon the original founding principles.
Rod Martin is not only effective and efficient, but he is also perceptive, wise and gracious. He gets things done. He is a great friend and a great ally.
Rod is one of the sharpest, most gracious men I know, and one of the most gifted political thinkers today. His ability to analyze issues and communicate thoughtful insights on them have earned him the respect of people across the political spectrum.
I am proud to have been Rod Martin’s friend for a quarter century, and I can tell you that he is one of the finest men and most outstanding leaders in our church and in our country today. He has a knack for turning everything he touches to success.
Rod Martin is a cornucopian entrepreneur and eutropic thinker whose influence radiates through an array of companies, institutions, movements and churches. A renaissance American, he is also a prolific friend of freedom and faith around the globe.
If Rod Martin represents the next generation of leaders, America has nothing to worry about.
A leader and a servant, in public life and in private, Rod Martin strides at the top of his profession, and has nowhere to go but up. He is in the truest sense of the word ‘outstanding’.
Rod Martin is undoubtedly one of the most accomplished thought leaders today. He is a wonderful mentor, a humble role model, and a deep inspiration for the next generation of scientific innovators and entrepreneurs.
Rod’s achievements pale beside his character and his brilliance. He sees what others can’t. He leads when others won’t.
Rod Martin is one of America’s finest young minds.
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