USA races ahead to be world's largest producer of oil and gas

 
Guy Bentley
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The USA now leads the world in the production of oil and gas overtaking both Saudi Arabia and Russia in the last six months, according to research from Bank of America Merrill Lynch (BoAML).

US oil production has surged by 70 per cent since it bottomed out in 2008, while liquefied natural gas output has jumped by 40 per cent since 2005.

As a result, America has become far less dependent on foreign energy, spending less than 1.5 per cent of national income on oil and gas from overseas.

The American experience provides a stark contrast with the situation in Europe and China, which have both been hit by high international energy prices.

Domestic natural gas prices in the US have plummeted in recent years thanks to the shale gas revolution. However, the benefits to the US industrial sector have not always been dramatic, with light manufacturing not experiencing the gains seen in other sectors.

Nonetheless, examining the data on a state-by-state basis, BoAML also found a strong relationship between US employment growth and the production of oil and gas over the last five years. Furthermore, wage rises have been strongest in those states with increasing oil output over the same period.

Energy intensive industries like chemicals have been particular beneficiaries of the jump in shale production. But the service sector has also had a taste of the action. BoAML point out that most of the jobs waiting tables and building houses in North Dakota, the fastest growing state last year, can be traced to the boom in shale oil.

Cash has been pouring into the oil and natural gas sector, reaching close to 20 per cent of total US private fixed structure investment, the highest level ever in US history at $200bn a year and almost as much as residential investment.

However, despite America's stellar performance, it has also been the case that crude production outside the world's largest economy has been lacklustre in recent months.

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