U.S. crude-oil production grew by more than one million barrels a day last year, the largest increase in the world and the largest in U.S. history.
In the latest sign of the shale revolution remaking world energy markets, crude production in the U.S. jumped 14% last year to 8.9 million barrels a day, according to the newly released Statistical Review of World Energy, an annual compilation of industry trends published by BP BP.LN -0.70% PLC for more than six decades.
The wave of new crude, flowing in oil fields from North Dakota to south Texas, helped keep the global market adequately supplied and helped markets weather declining oil production elsewhere in the world.
“The growth in U.S. output was a major factor in keeping oil prices from rising sharply, despite a second consecutive year of large oil supply disruptions,” said BP Chief Executive Bob Dudley.
In volume terms, last year’s U.S. production gain of 1.04 million barrels a day surpassed the earlier biggest annual increase of 640,000 barrels per day, recorded in 1967.
Most of this new production is coming from dense shale-rock formations, such as the Bakken Shale in North Dakota and the Eagle Ford Shale in Texas. In recent years, the oil industry has developed techniques to hydraulically fracture, or frack, these shales, freeing up previously trapped oils.
Beyond the U.S., oil production increased almost 7% in Canada, raising North America’s profile as a global oil producer.
The boom in the North American oil patch contrasts sharply with developments in many big oil-producing countries such as Nigeria and Venezuela, where aging oil fields and political strife led to steep declines.
Despite rising U.S. production, the nation remains a large crude importer. However, it is bringing in fewer barrels than at any time since the mid-1990s. That is freeing up some traditional suppliers to ship their barrels elsewhere and satisfy rising demand in Asia and Latin America.
This surge of U.S. oil output is expected to have only a modest impact on global prices. The U.S., the third-largest global crude producer behind Saudi Arabia and Russia, still pumps only about one of every 10 barrels world-wide. What’s more, restrictions on exporting crude oil from the U.S. have muffled its potential impact.
U.S. crude-oil production has raced ahead of new pipeline infrastructure to move it from oil fields to refineries. This has created regional gluts, such as in a major trading hub in Oklahoma, and driven down prices there. But it hasn’t spilled over to depress global prices or deliver substantial amounts of cheap oil and fuel to consumers. The average crude price at a major benchmark hub in Europe last year was $111.67 a barrel, compared with $94.13 in Oklahoma.
This could change as production rises and more pipelines are built—and as railroads move more crude around the country. “Growth in U.S. shale-oil production could have the most significant long-term impact on oil prices of any supply event in recent decades,” noted a report from Pacific Investment Management Co., which runs one of the world’s largest commodity funds. But current output “has not yet been sufficient to meaningfully weaken oil prices.”
While the U.S. shale boom increased production, many other oil-producing regions struggled with declining volumes. U.K. production fell 13.4% in 2012, as some of its North Sea oil fields near their fourth decade of life. Former OPEC member Indonesia experienced a 3.9% decline.
Libya grew its production from 479,000 daily to 1.5 million, mostly because it was able to restart output following disruptions related to its civil war. Powerhouse Saudi Arabia raised its world-leading output almost 4% to 11.5 million barrels per day.
The fracking techniques that have unleashed so much crude in the U.S. haven’t yet had an impact overseas. However, recent government reports suggest that Argentina and Russia could have enormous deposits of crude oil accessible through fracking. Development of these resources has been slowed by government policies, competition from less expensive fields and a scarcity of specialized equipment.
The extra North American supply made it easier for the U.S. and Europe to impose tough sanctions on Iranian oil exports in a bid to hamstring its nuclear-weapons development. Iranian oil production fell 16% to 3.7 million barrels per day, the largest drop among major producers, BP said. Other oil-market analysts have said Iranian exports have fallen by more than one million barrels per day since sanctions took full effect last summer.
Additional supplies also make it easier to deal with rising demand from energy-hungry countries such as China, whose quest to lock up oil and gas resources has been a source of friction. Much of the recent tension in the South China Sea, for example, is due to China and its neighbors eyeing potentially rich underwater hydrocarbon reserves.
“A better-supplied world is a safer world,” Daniel Yergin, vice chairman of energy consultancy IHS, said at a conference Wednesday.