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Greasing the way

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The United States will become the world’s largest producer of oil and natural gas this year, a study by the Wall Street Journal concludes.

U.S. production has eked slightly ahead of Russia. And our imports of natural gas and crude oil have fallen over the last five years.

It was not long ago that forecasters were triumphantly warning that about half of the world’s reserve of oil had been depleted and that natural gas would become increasingly scarce. In their view, we had destroyed our world by over exploitation.

None of those bold predictions have come true. The United States, riding on the backs of innovative entrepreneurs and engineers, has witnessed extraordinary exploitation of deep-well and horizontal drilling combined with fracturing porous shale deep below the surface of the Earth to free large quantities of natural gas and crude oil.

North Dakota, Texas and Pennsylvania led the way in adopting the new technologies, and as a result the nearly 10 million barrels of oil are delivered to the nation’s fuel supply every day. It was just a few years ago that U.S. production was 7 million barrels a day.

To put that number in perspective, Saudi Arabia produced slightly less than 12 million barrels a day in July. The reduction of crude oil imports has helped bring our trade deficit closer to balance.

However, it is the production of natural gas that has grown exponentially here and, thus, has provided the most benefit by meaningfully lowering heating costs for homeowners. And America’s air quality is markedly better because the new fuels are cleaner to use.

America has driven the technological advances that are providing this surge while Russia has done little to exploit the new techniques, even though it may sit upon very large underground shale resources just awaiting the use of American technology.

America also is the source of the capital required to invest in this exploration. More than $50 billion nongovernment dollars were invested in oil and gas field exploration this year, mainly money raised in American capital markets.

All of this success comes in spite of the government, which for the last five years has focused attention on investing taxpayer dollars in failing solar industries and subsidizing a wind power industry that cannot supply electricity at competitive rates even with their federal, state and local government tax benefits.

Washington bureaucrats have spent inordinate effort to find a way to slow the development of North Dakota’s resources and President Obama continues to postpone a decision of whether to allow a pipeline to deliver Canadian crude oil to American refineries.

The oil investment in America will become a defining piece in economic history, and the lessons from its growth should provide an important study in value investing for future private risk-taking. And the oil field workers, many of whom have migrated to the high-paying jobs available to anyone ready to work, have built better lives for their families and communities.

The explosion of oil development has been good for the security of our nation, our balance sheet and our workforce. It is just too bad that New Yorkers have to move to North Dakota to join the prosperity.

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