The U.S. and the new oil geopolitics: the impact of shale

Article by

Hermes Pérez


Oil production in the United States, which had been declining steadily since 1970, was boosted by the growing exploitation of shale¹ . Access to this unconventional crude was made possible by new technological discoveries associated with advances in horizontal drilling and hydraulic fracturing² . The union of the described elements propitiated what could be considered the most important structural change in the oil business and in world geopolitics in the last 50 years.

In this sense, U.S. pumping can be divided into three stages.

  1. A first phase that began in 1901 and lasted until 1970. This was characterized by an almost continuous increase in production, which peaked in November 1970 at 10.04 million barrels per day (mbd).
  2. The second stage was characterized by accelerated productive decline and ran from January 1971 to December 2008. In that period, production fell to 3.813 mbd in September 2005, from almost 10.0 mbd at the end of the 1970s.
  3. The third phase started in 2009 to the present. In this period, an almost exponential increase in crude oil production can be observed in the United States, which reached its historic peak of 10.9 mbd in July 2018. This spectacular boom was due, among others, to the exploitation of unconventional shale crude, improved horizontal drilling techniques and hydraulic fracturing.

In this sense, this note will focus on U.S. production from 2009 onwards with the important boom that the production of shale and its implications meant for this country and for the world.


The new geopolitics of oil

The U.S. production boom based on shale, has resulted in the most important change of oil geopolitics in recent years. It has also meant that the United States relies less on foreign purchases of oil.

In the productive area, we should highlight the implications of shale for the world market for crude oil, which was not possible with traditional techniques. New technologies, such as hydraulic fracturing and horizontal drilling, made viable this new production, especially in the United States, which boosted the rise in its production. This new dynamics has increase the productivity and the less productive vertical drills have declined significantly since 2008 and are tending to disappear.

The development of new technologies had their support in higher prices of crude oil, which were affected by the progressive influence of financial markets, which made profitable investments in expensive deposits.

Oil prices average USD 81 from 2001 to mid-2014 (USD 81), in contrast with the previous decade (USD 18). This element allowed the emergence of new technologies that made the development of costly deposits profitable.

In this sense, the new structure of production costs in the United States has maintained a clear downward trend since 2013, which was around USD 75 in 2013 but has fallen to USD 35 on average in 2017, according to Rystad Energy.



The shale boom prompted the rise in USA production that went from 4.9 mbd in 2008, to 11.3 mbd in august 2018, its highest level in the history since 1983. In addition to that, the boom in the exploitation of unconventional crude oil has led to a progressive reduction in U.S. imports and an increase in U.S. exports, which have also benefited from the White House’s energy policy.



1/ Shale is porous rock from which oil and gas can be obtained using the technique known as hydraulic fracturing (see note 2).
2/ Horizontal drilling and hydraulic fracturing are recent techniques that allow the extraction of oil from the shale form the underground. It consists of drilling a vertical well in which, once the desired depth has been reached, the drill is rotated 90° horizontally and drilling continues. Then pressurized water is injected mixed with some material and chemicals, in order to widen the existing fractures in the rocks that contain the gas or oil, to facilitate its extraction.




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