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U.S.

Energy Boom
A Day at the Races: U.S. Overtakes Russia in Energy Production
The United States is currently on track to outpace Russia in terms of natural gas and oil production. While early estimates are often inconsistent, some evidence already shows that the U.S. is already the largest producer of these commodities. Oil and natural gas production in the United States in July reached approximately 22 million oil-equivalent barrels a day according to the U.S. Energy and Information Administration and the International Energy Agency, compared to Moscows own 2013 forecast of nearly 21.8 million. The obvious reason for this overtaking is growing production of natural gas in the United States. Shale discoveries and improved extraction techniques, including hydraulic fracturing, are responsible for much of the growth of natural gas in the last decade. However, crude oil production is continuing to rise as well and contributes a fair amount to the overall growth. In 2012, crude production increased 14% from the previous year to 8.9 million barrels a day, making the U.S. the fastest growing producer of oil. The largest oil fields in the nation are producing more oil than they did in 2012 and are expected to produce more in the future, again caused by developments in shale-fracking. While Russia produces more crude (10.8 million barrels/day) than the U.S. (9.9 million barrels/day), Russian oil production is expected to more or less stagnate in the next few years as U.S. production continues to increase greatly.

The New Economy


Massive reserves of oil and natural gas means the United States can achieve a greater sense of energy security. Energy security from greater domestic production is important as it will inadvertently lower the trade deficit: not only will imports of other energy sources decrease, but exports of other energy sources (such as coal) will increase. This has already been observed in Europe, where cheaper coal and oil from the U.S. means Russia is already losing market share.

Significance to Manufacturers
Between 2006 and 2010, natural gas prices for manufacturers fell 36%. This decrease was so dramatic that total energy prices from all sources (natural gas, oil, electricity, coal, etc.) still fell by 11% despite an increase in price for every other energy source. Manufacturers are able to switch out a portion of their energy sources with relative ease depending on their sector. For example, plastic manufacturers may switch out as much as 40% from one form of energy to another. With lowering natural gas prices, one would expect more manufacturers to make the transition to natural gas. Manufacturing is making a move back to the United States. Rising wages in foreign countries and transportation costs are making it

Austin K. Fluck, Associate Economic Analyst October 7, 2013 Sources: United States Energy Information Administration, WSJ

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