The autumn of 1908 was a landmark moment in America’s car industry. In September of that year, William C. Durant founded the company that would later become General Motors. Not even a month later, Henry Ford launched the Model T—the very car that heralded the era of the U.S. mass automobile market.
The United States pumped 488,000 barrels per day (bpd) of crude oil that year, and the oil was mostly used in refining to produce kerosene for lamps, the U.S. Energy Information Administration (EIA) said on Tuesday in an overview of the domestic energy supply and demand of the past century.
The year 1908 was 49 years after Edwin Drake had struck oil in Pennsylvania with the first commercial well in the country.
The mass market cars and the industrial revolution of the early 20th century not only increased demand for refined petroleum products, it also permanently steered demand toward gasoline for cars, and away from oil used in lamps.
When Ford was launching his first mass-market automobile in 1908, U.S. energy consumption came in at 15 quadrillion British thermal units (Btu). Coal fulfilled 75 percent of that need.
By 1997, almost a century of constant technology advances and economic growth (save for a few recessions and the Great Depression) later, U.S. consumption had grown to 94 quadrillion Btu. By 2015, the U.S. primary energy consumption had reached new heights of 97.7 quadrillion Btu.
U.S. energy production has seen similar growth since 1908, with fossil fuels accounting for the majority of U.S. energy production as of 2015. But unlike a century ago, renewable energy now accounts for around 10 percent of that energy output. This means that somewhere along the way, fossil fuels lost market share.
EIA data shows that natural gas, petroleum and coal combined accounted for around 81 percent of U.S. energy production last year, with renewables at some 11 percent, and nuclear at 9 percent.
Crude oil production, having peaked at 9.6 million bpd in 1970, steadily declined (except for rare exceptions) until 2008, hitting a bottom at the 5 million bpd mark—a level that was at the time, unseen since 1949.
Meanwhile, the shale revolution began to take hold, and crude output returned to its growth cycle, reaching 9.4 million bpd in 2015. The previous year, production had grown by 1.2 million barrels a day, the largest volume increase since recordkeeping began, which was in 1900. Fracking at tight oil plays in North Dakota, Texas, and New Mexico contributed the most to the annual volume increase.
And while low crude oil prices over the past two years have managed to drive some drillers and players out of the more cost-intensive shale plays in the U.S., U.S. crude inventories continue to be higher than the markets would like, with the EIA reporting a massive build this Wednesday of over 14 million barrels—a single-week build not seen in 34 years.
The shale boom also led to U.S. natural gas production reaching a record-high in 2015.
EIA’s projections in its latest ‘Short-Term Energy And Winter Fuels Outlook’ are that natural gas marketed production will drop this year by 1.6 percent compared to the 2015 volumes, which would mark the first yearly decline since 2005. As far as crude oil production is concerned, it is expected to average 8.7 million bpd in 2016 and 8.6 million bpd in 2017, compared to 9.4 million bpd in 2015.
Fossil fuels have dominated U.S. energy consumption for more than 100 years. According to EIA’s reference case scenario for 2040, the fossil fuel share will drop to 76.6 percent of energy consumption within 25 years.
By 2040, technology and innovation breakthroughs, along with the Henry Fords (or Elon Musks, if you will) of their time, may drive U.S. and global energy into a new era.
By Tsvetana Paraskova for Oilprice.com
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