How farming and fracking changed the US oil industry
Opinion: thanks to corn ethanol and fracking, the US is now on the cusp of achieving energy independence
The modern history of the United States is inextricably linked with oil and the Middle East, but this is rapidly changing. This week, the US hit a near 50-year high in domestic oil production, further reducing its reliance on OPEC, and now looks instead to Canada for the bulk of its oil imports. While future oil trends are impossible to predict, historic oil consumption patterns leave fingerprints in the economy that can be traced to significant events. This is the story of two such events: how farming and fracking have changed the face of US oil.
While most oil is used in transport, internal combustion engines are prone to a peculiar problem called "knocking" which limits their performance. It was discovered in the 1920 that adding lead (more correctly tetraethyllead) as an additive to the fuel used solves this problem while also increasing engine performance.
This was an incredible folly for humanity. We know today that lead is highly poisonous. Tetraethyl lead is absorbed quickly by the skin, the lungs and the gastrointestinal tract and its use causes many health issues, environmental problems and has also been linked to increased crime rates. In 1986, the United States, like many countries, formally banned lead as an additive and the search began for a safer alternative.
It was known that ethanol produced from corn also makes an excellent additive however the availability of other alternatives such as MTBE (Methyl tert-butyl ether), low oil prices and high corn prices made it unattractive. It wasn’t until early 2000s that ethanol came back on the political scene thanks to concerns over high oil prices, farmer discontent with low grain prices and questions around the safely of MTBE. In 2005, fuel distributors were obliged to blend ethanol into the gasoline for transport thus creating a massive market for corn ethanol.
As oil prices continued to rise in the late 2000s, the US government increased fuel-economy standards for vehicles. Both these measures coupled with considerably higher oil prices caused US oil consumption to peak in 2006 and drop by 7 percent over the next decade.
Today, the United States is the world’s largest producer of corn ethanol, with an output more than double that of Brazil, the next largest producer. Forty percent of the more than 80 million acres of farm land harvested in 2014 for corn goes to ethanol production. Over 14 billion litres of ethanol was consumed last year replacing oil and accounting for about five percent of energy use in transport.
The second part of the story is fracking or more correctly "hydraulic fracturing" and its dramatic impact on domestic oil production and imports. Fracking is the process of drilling kilometres into the ground and using special pressurized fluids to fracture the rocks to release oil and gas trapped inside. Previously, it was thought that oil and gas trapped in these types of rock (called unconventional oil and gas) were too difficult and expensive to extract but years of advances in drilling and geology have changed this.
Today, US domestic production of crude oil is booming and almost back to its heyday when production reached an annual peak of 3.5 billion barrels in the 1970s. In 2014, North Dakota joined a small list of regions on the planet in producing over one million barrels a day, something completely unimaginable a number of years ago when discussions of peak oil and resource depletion were widespread.
The dramatic increase in domestic oil production has obviously lowered crude oil imports, but it has also had another curious impact which links to Canada. Oil comes in many grades and densities and the density of oil is important as it determines how it is refined. America’s new found unconventional sources of oil tend to be light or low in density, whereas Canadian oils are generally heavier.
This is an incredible turnaround for a country that relied so heavily on external providers for its energy
Traditional oil refineries in the States were not set up for refining very light oils and must operate on strict blending requirements to keep the average density of the oil roughly constant. Instead of modifying existing infrastructure, refiners are blending the new lighter unconventional oil with imported heavier oil from Canada to maintain suitable densities for their existing infrastructure. This is why US imports of light oils have fallen while imports of heavier oil from Canada have increased significantly in past years.
The US is now on the cusp of achieving energy independence. This is an incredible turnaround for a country that relied so heavily on external providers for its energy. What impact this will have on the global landscape is hard to say but it has already had a ripple effect in Ireland: who would have thought that there would ever be plans to import gas from Texas into Cork?
The views expressed here are those of the author and do not represent or reflect the views of RTÉ