The news: America is in for an oil boom. According to the U.S. Department of Energy, American oil production will continue its swift rise, nearing record highs by 2016. A new report by the Energy Information Administration estimates that in just three years, domestic oil production will hit 9.5 million barrels of oil per day – just shy of the record of 9.6 million barrels per day set in 1970.
“Ongoing improvements in advanced technologies for crude oil and natural gas production continue to lift domestic supply and reshape the U.S. energy economy,” the report opens. American production will increase by an average of 800,000 barrels per day each year, until 2016.
But we’re not alone. America’s neighbor to the south is set to see its own oil production skyrocket. Mexico is predicted to remove barriers for international investment in its oil fields, a move that is estimated to double Mexico’s oil production. The move could bring up to $15 billion in foreign investment to Mexico, and increase global oil production by 2.5 million barrels per day.
Why this matters: More oil means lower prices. Specifically, lower gas prices.
With the United States nearing 35-year-old records in oil production, and Mexico set to double its own production, prices of oil are predicted to drop to somewhere around $90 per barrel by 2017 – down from $112 per barrel in 2012, and significantly down from the peak price in 2008 of $145 per barrel.
Which will translate to lower prices at the pump. According to the Energy Information Administration, the average price of gas in the U.S. is currently (as of December 16) $3.23 per gallon. But it depends on where you live:
Source: U.S. Department of Energy
The current price of oil is around $108 per barrel, according to the Brent benchmark. As North American oil production hits record highs, that’s going to drop, so gas prices per gallon will drop, too. Millennials will soon be paying some of the lowest gas prices of their lives.
Increased domestic production also means less reliance on foreign imports. Could that mean less volatility in gas prices when turmoil hits countries in the Middle East? Or, dare I say, a less meddlesome U.S. presence in the region? Now, that’s probably just wishful thinking.
For now, let’s just be happy with lower gas prices, I suppose.