The U.S. oil market could be on the verge of its own fracking revolution, similar to what the natural-gas market is already experiencing. As a result, domestic production is now projected to rise significantly over the coming decades, reducing the relative share of imports in U.S. oil consumption.
Advances in horizontal drilling and hydrofracking, in which highly pressurized liquids are injected into underground rock, have been used increasingly over the past few years to extract natural gas. The result has been a substantial increase in recoverable reserves -- accompanied by a lot of controversy over fracking's environmental effects -- and an associated decline in the cost of natural gas.
In late 2007, wellhead prices for natural gas were hovering in the range of $6 to $7 per thousand cubic feet; by late 2011, they had declined to $3 to $4, and they have fallen further since. John Deutch, a former director of the Central Intelligence Agency, has written that, given the impact on energy markets and therefore geopolitical dynamics, "it is perhaps a permissible exaggeration to claim a natural-gas revolution."
The same controversial technologies used to recover natural gas from deep-rock formations are now increasingly being used to extract oil. Oil is already being produced from shale at several locations throughout the U.S., most notably the Bakken shale in North Dakota.
As Jim Mulva, the chief executive officer of ConocoPhillips, recently said, "The revolution has spread to domestic oil production. And it may track the path it followed with natural gas. We just don't know yet. But it looks promising."