The Shale Oil Boom: A US Phenomenon

Bottom Line: The resource size of U.S. shale oil, the ability of industry to develop these resources, and U.S. legal protections mean that the U.S. shale oil revolution cannot be copied by other countries. As a result, the U.S. will become the world's dominant oil-producing nation. However, U.S. shale oil is vulnerable to environmental opposition.

The U.S. has the largest shale oil reserves in the world. Drilling intensity in U.S. shale oil plays has skyrocketed over recent years. In addition to these vast oil reserves, additional factors that allow the U.S. to reach a level of oil production that is impossible for other countries to achieve include: 

• In the U.S., individuals and companies may possess property rights to mineral resources while elsewhere internationally these rights belong to state actors alone. As a result, U.S. landowners are freely capable of and often incentivized to transfer their property rights to the oil industry via sale or lease. Such a secondary market often facilitates rapid energy exploration and development.
  
  
• Unlike Europe, U.S. shale formations exist in sparsely populated areas that enables drilling intensity to reach normally unattainable heights.
  
  
• The U.S.’s oil and gas sector benefits from the presence of domestic financial institutions, venture capital, and private equity firms eager to fund independent companies and more open to forms of private financing.
  
  
• The U.S. has far greater drilling intensity and horizontal capabilities. Of the U.S. drilling rigs, roughly 90 percent were equipped for horizontal drilling, an essential component in shale development. In 2011, nearly 95 percent of U.S. horizontal and vertical wells were fractured compared with less than 10 percent outside the United States.
  
  
• The U.S. has many independent energy companies whose guerilla-style operational mindset has proven essential to the exploitation of shale formations, while the rest of the world tends to rely on slow-moving giants.
  
  
• The U.S. has a large amount of midstream and downstream infrastructure (pipelines, storage, refineries), as well as adequate water supplies, that in many countries – including China – appears to be inadequate.

Several regulatory problems and environmental concerns still linger with respect to the possible filling of existing gaps in the U.S. oil infrastructure system. Across the country, climate activists and local environmental groups are campaigning to slow or stop the construction or expansion of oil and gas pipelines.

Read the full study here.