North Dakota 4

The rise and rise of North Dakota oil production has now moved this great plains state to fourth rank in US production, behind Texas, Alaska, and California respectively. Combined with the state’s sparse population, this partially explains why North Dakota currently enjoys the lowest unemployment rate in the US. (Yes, that’s right, the lowest at 4.2%). In my February newsletter, Energy Supply and the Individual States, I explained the asymmetric benefits of US production: local economies can benefit enormously from oil and gas production, even as this production doesn’t move the needle financially for the country as a whole.

It’s true that US oil production is currently at five year highs, however, and that North Dakota production has played a big role in steadying US supply over the past year. This of course doesn’t, and can’t, change the fact that US oil production peaked in 1971, or that the US imports more than 2/3rds of its oil supply. But that won’t stop the “supply” of misleading journalism, such as the 2009 Leonardo Maugeri article in Scientific American, which foolishly claimed that success in enhanced oil recovery at the Kern field in California would alter aggregate US oil production. Or even more incorrectly, that enhanced oil recovery would alter global production. This Scale Fail with regard to the public comprehension of oil supply is fairly rampant. I’ve have predicted, for example, that the next Presidential election cycle will bring forth candidates who will cynically, and dishonestly, claim the US can become oil independent once again, once we start new drilling. That said, let’s look at the chart of North Dakota oil production:

Nearly 250 kbpd in oil production–from North Dakota? That chart is wonderful news for North Dakotans. It’s not such great news for the world, however. Because with Non-OPEC supply having peaked in 2004, and global supply having peaked in 2005, it puts a rather fine point on the fact that very few regions in the world actually made a supply response to the price move from 40.00 to 150.00. If Fargo did not already have a certain resonance owing to recent cinematic history, there’s a new reason now.

-Gregor

Photo: North Dakota state highway sign?