Myth #2: Gas prices have risen significantly because U.S. oil production was limited by the government. The Reality: Gas prices increased in 2021 due to an imbalance in global energy demand and supply, driven by the rapid global economic recovery. In 2022, prices were driven by Putin’s war which created uncertainty over global energy supplies and Russia’s role as the second largest exporter of crude oil. The graph below shows U.S. crude oil production for nearly 150 years. Since 2008, U.S. crude oil production has generally increased significantly.
Source: U.S. Energy Information Administration
U.S. crude oil production more than doubled from 1.955 billion barrels in 2009 to a decade high of 4.466 billion barrels in 2019. Oil production declined significantly in 2020, dropping approximately 8% to 4.130 billion barrels. A variety of factors affect crude oil production, with a key factor being global demand for oil. COVID caused a global economic contraction in 2020 with global GDP declining by 3.3% according to the World Bank , and U.S. GDP decreasing 3.4%. The global economic decline in 2020 contributed to the drop in oil production as demand for energy decreased with the economic contraction. 2021 featured a global imbalance of demand and supply in the energy sector. The COVID driven collapse of energy consumption in 2020 prompted energy companies to cut investment and supplies. Energy supply was also impacted by weather, labor shortages, maintenance backlogs, and infrastructure issues. As global demand increased in 2021 due to economic growth so did U.S. oil production, but with a lagging effect as production ramped up. Although U.S. crude oil production declined slightly in 2021 to 4.083 billion barrels, production in the second half of the year increased 5% relative to the last half of 2020. 2021 U.S. oil production was still almost 20% higher than 2017 oil production. The U.S. Energy Information Administration forecasts that production will rise to an average 12.0 million barrels per day in 2022 compared to production of 11.6 million barrels per day in December 2021. Record-high production is expected for 2023 with an average of 13.0 million barrels per day. The previous record was an average of 12.3 million barrels per day in 2019. The United States is the world leader in the production of oil followed by Saudi Arabia and Russia. Combined, the three largest producers account for 43% of global production. The table below shows the five largest oil producers in the world and their share of global production.
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Center for Business and Economic Insight
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