For the majority of Americans, the concept of hydraulic fracturing—more commonly referred to as “fracking”—probably isn’t thought about on a day-to-day basis, if at all. However, hydraulic fracturing has had a significant impact on the American economy, and therefore the average American consumer.
Background on Fracking and the Oil Boom
In recent years, certain parts of the United States have experience an oil boom unlike ever before, namely the Eagle Ford Shale in Texas, and the Marcellus Shale, which extends throughout parts of the Appalachian Basin. The areas, which had long been known to have reserves of oil, had not been accessible until the invention of hydraulic fracturing, which uses high-pressure technology to create “fractures” with the shale, allowing natural gas and oil to travel to the surface.
An Increase in Oil, a Decrease in Oil Prices
The advent of hydraulic fracturing meant something big for Texas and other parts of the U.S.: exponentially increased oil production. As the basic laws of supply and demand state, as the amount of oil available increased, the prices for the oil decreased. This relationship has had many additional variables of late, but the basic principle still applies.
According to a study published by ICF International and presented to The American Petroleum Institute, the amount of oil produced in the United States increased from .75 million barrels per day in 2008 to 4.78 million barrels per day in 2013. The increase had a dramatic effect on the cost of oil: ICF International estimates that international oil prices, per barrel, were an average of $12 to $40 lower in 2013 than they would have been without the increase in U.S. crude oil production.Read more