America is a “Competitive Check” on World Oil Markets

There has been a lot of noise about the oil market recently, and the American people deserve to know the factors that affect this global commodity.

The ultimate price-setter is the global oil market, which attempts to meet limited supply with nearly limitless demand driven by a number of factors like population growth, transportation needs, the change of seasons in different parts of the world, and wildly shifting global industrial output patterns, to name a few. Here are some additional facts and energy realities to consider as 2024 proceeds:

Oil Prices Shaped by a World Market: The entire world’s economy functions on the free flow of oil at market prices. Interruptions anywhere of supply can disrupt energy markets and can lead to economic disasters – note the Oil Crisis of the 1970s, and the more recent cutoff of Russian natural gas to Europe following the invasion of Ukraine. According to the EIA: “Crude oil prices are driven by global supply and demand. Economic growth is one of the biggest factors affecting petroleum product – and therefore crude oil – demand.” The agency also states that buyers and sellers are participating in global auctions. “Crude oil and petroleum product prices are the result of thousands of transactions taking place simultaneously around the world at all points in the supply chain – from the crude oil producer to the individual consumer. Oil markets are essentially a global auction – the highest bidder will win the available supply.” And like any auction, “bidders don’t want to pay more than they have to.”

The World’s Vast Oil and Gas Industry: The rise of American shale production has completely changed the game. As historian Dan Yergin notes, the shale revolution rebalanced the market. “The very existence of a source on this scale is a bulwark against market panic.” American shale keeps consumers safe from price spikes and allows the U.S. to export reliable sources of energy abroad. However, even as American oil and gas industry has risen as an important player in global markets, it must be remembered that this US industry is just a portion of global production. Investor-owned, Western oil and gas enterprises are minor players in a world market dominated by state or family-run enterprises. An overwhelming majority of oil and gas production is directed by foreign governments.

Metrics on America’s Oil & Gas Industry: There are more than 10,000 companies and businesses that comprise America’s oil and natural gas industry, including producers, equipment manufacturers, drilling contractors, service companies, and engineering outfits. – slivers of a much bigger market.

U.S. Companies’ Contribution to Global Production: No single American oil and gas company has produced more than about 6% of the country’s oil in any given year. When considering that the US only produces about 15% of the global oil supply, that means that no single American oil and gas company produces more than 0.1% of global oil production. As the world emerged from COVID, the U.S. was nearly HALF of the global oil production increase! Percentages are the proportion of global production increase attributable to that country.


America is the Counterbalance: Appearing before a House Appropriations subcommittee on May 15, Federal Trade Commission (FTC) Chair Linda Khan described America’s role in the global oil market as a “competitive check” to producers in the Middle East. Khan noted that “for decades OPEC and OPEC+ have controlled global oil prices,” but increasing US production allows markets to escape “the whims of what those [foreign] producers…” Instead of working to manipulate world oil markets, America has become the most important counterbalance in the global oil market. Since 2005, the United States has nearly doubled its share of global crude oil production (from 7% to 15%). This increase helps stave off the kinds of price shocks we have seen in the past.

Bottomline: Because of innovation and the pursuit of cutting-edge technologies, American producers have built an energy advantage unlike any other nation. Fortunately, America is emerging as the top crude producer as oil demand surges, reacting to increasing world population. It’s critical that American policymakers support policies that help the US maintain this strategic advantage. Experts agree, demand for oil will increase for decades and US oil and natural gas suppliers are well-positioned to keep the market supplied with clean, reliable, and affordable fuels and products. Election-year speculation about American energy producers is predictable, but it’s also intellectually lazy.


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