The role of oil in US economy

OIL DEPENDENCY IMPLICATIONS ON THE TRADE BALANCE AND

HOW SHALE GAS CAN HELP TO STABILIZE.

Carlos Gonzlez
UNIVERSIDAD AUTNOMA DE MADRID |

Universidad Autnoma de Madrid

Facultad de Ciencias Econmicas y Empresariales
Maestra en Economa Internacional
Historia de las relaciones econmicas internacionales
Ciudad Universitaria de Cantoblanco, 28049 Madrid
http://www.uam.es/ss/Satellite/Economicas/es/home
carlos.gonzalezalvarez@estudiante.uam.es

Index
Abstract ........................................................................................................................................... 2
1.

Introduction ............................................................................................................................. 4

1.

Just a while before it................................................................................................................ 5

2.

First days. ................................................................................................................................. 6

3.

Becoming an energized, rolling an unstable world. ................................................................ 9

4.

Big bang of oil industry and markets ..................................................................................... 13

4.1.

5.

OPECs role ..................................................................................................................... 16

An oiled trade balance? ......................................................................................................... 20

5.1.

Exterior deficit analysis .................................................................................................. 24

6.

Fracking the economy ........................................................................................................... 26

7.

Conclusions ............................................................................................................................ 29

References .................................................................................................................................... 30
Illustration list ............................................................................................................................... 33

Abstract

World economy changed tremendously from the 19th century to the 20th modifying completely
the way people produce and consume. One of the principal vectors of this turn has been energy
as a mean of power for satisfying our needs and the way of living. We present in the following
lines a quick review of how the discovery of petroleum influenced the energy field, production
sector, the global share of goods and services, the economic geopolitics and the live of all,
focused on the United State case study. A variety of constructed timelines will bring you through
the timeline up to this date making a prospective exercise of what oil holds ahead for us.

1. Introduction
Man working and animals pulling were the main source of energy before the first industrial
revolution back around 1770 in England with wind, water and lumber as reduced fuels. The steam
engine, coal, the locomotive, oil, electricity, the automobile and some guys known as Watts,
Tesla, Edison, Drake, Rockefeller, Ford among others have brought us from an agricultural driven
world in the XVII century to an energy dependent one led by just few economies, mainly the one
of United States of America.
Since the discovery of petroleum wells at Oil Creek in Pennsylvania in 1859 the national
production rate increased in an enormous way leading the impressive growth of the US industry,
production that reached in 1938 64% of world production, 5 times more than the Soviet Union
who was the second world producer. (Energy Policy, 2011)
Oil consumption, in great part used for transportation (Stephen Land - The History Channel, 2010)
became an insatiable need for Americans and National Production wasnt enough for satisfy it in
1950 US still accounted for 52% of global production ending in 1960 when it became a net
importer of oil. Since then, as well as the positive GDP, the negative trade balance hasnt stop
neither their need for oil. Nowadays the black gold is the largest traded commodity in the world
and its industry is also among the very first ranked. (Parra, 2009)
Recent economic crisis have produced an important deficit in the American economy, reaching
levels considered by many as unmanageable (Fernndez, 2007) arising an important global
discussion of how much can be supported and what measures they have to implement to turn
the direction of this negative vector. US deficit reached 6% in 2006, accounting 3% in 2012 (IMF,
2014). However, when everybody thought that American oil production was downsizing without
return impacting even more the deficit, a new technology for capturing and pumping deeper oil
sources has emerged making to raise the American oil production again and projecting a large
amount of reserves that could lead to enhance the trade balance again. In fact, shale oil has
contributed to 28% crude oil production increase passing from 5 millions of barrels per day in
2007 to 6.4 mbbl in 2013.
Thus, we present in this document an outline of the weight of energy, more specifically oil, in the
American recent history, and how it has impacted on growth and deficit of its economy. Well
draw a resumed timeline discussing the most important milestones of energy in US history,
reviewing the main actors of its development, how prices drive modern economy and how it
became maybe the most important element in global geopolitics for the recent years. The
document is divided in different periods from the discovery of the first well to the shale oil now.
Well emphasize on the relationship of oil and modern economy, following the oil price index

timeline making a focus on crisis, shocks, and conflicts. Finally closing with the analysis of the
deficit and the possible shale gas impact on it.

1. Just a while before it

It is been told several stories about the first appearance of this black mass, from the bible
mention of the used of bitumen for the Noahs ark (Stephen Land - The History Channel, 2010)
and then in several other times for instance in the ancient Mesopotamian civilization, more than
5.000 years ago, where is believed that a resource coming from earths was used for construction
of temples, ships and water tanks. (Forbes, 1936) (Whiteoak & Read, 2003)
There are also references for ancient Persia and Sumatra were oil was considered to have medical
benefits, for purge, rheumatism, cramps, cough and so many others even to be though the cure
of leprosy as is quoted on Lescaroux & Rech work (Oil Economics, 2013): Drunk as bituminous
water it breaks up blood clots and causes abortions. Spread on cattle and beasts of burden, it
cures mange and Pliny write that the Babylonians believed it to be good for jaundice and for
whitening the eyes. They also believed it to be a cure for leprosy, eruptive and itching skin
diseases. It is used as an ointment for the gout. (Agricola, 1546)
In the same work Lescaroux & Rech mention different evidences of its use as for example for
mummification in Egypt (1000 B.C. to 400 A.C.), adhesive, jewelry, weapons, lighting,
waterproofing, medicines and heating in Persia and China, Russia or by Native Americans in
different epochs. As we can see, it has quite stories which are not purpose to describe in this
report, given that neither of them make a minimal impact in society as in modern times.
Before going forward to the first days of the petroleum as a source of energy, as we know it now,
we can comment the first indications of a comparable use, it was the Chinese civilization, around
400 A.C. made the first oil drills, pipelines made of bamboo and networks of it (1000 A.C.). A
century before Persians alchemist made a distillation of oil in an alembic obtaining kerosene,
which made the path to this king of light lamps. (LESCAROUX & RECH, 2013). Samuel Kier, the so
called Grandfather of the Oil Industry in America developed a medicine named Kiers Rock Oil
sold around 1849 for 50 cents the bottle. (Mann, 2009). And then, in 1853 Francis Brewer took a
sample of Rock Oil, from Oil creek to the chemical department of his university Dartmouth
College where George Bissell, another fellow student, in a visit to the school crossed by a sample
of this liquid and send it to the University of Yale. Professor Benjamin Silliman suggested that the
Kier Rock Oil could be distilled to produce kerosene. Bissell end it up buying some acres in the
area and organized the first company of oil called the Pennsylvania Rock Oil & Co in 1854.

2. First days.
Bissell was the first one to envisioned profit for selling the kerosene for lighting, (Stephen Land The History Channel, 2010) but he needed funding for guaranteeing supply which required,
according to his project, to drill the ground and obtain more quantity of the black oil. As usually
happens no much people believed in this kind of ideas, but he persisted hiring his future partner
Edwin Drake a former railroad conductor to drill his oil field. Drake was sent to Titusville working
for the former Penn Rock Oil & Co, now Seneca Oil Co, where after several failure attempts Drake
brought a Kiers Rock Oil employee William Uncle Billy Smith who finally pumped the first oil
well in 1859. (Mann, 2009)
In parallel Kier also went to the University of Pennsylvania in Philadelphia and professor Curtis
Booth recommended to distil the oil and produce illuminant to compete with whale oil for
lighting lamps. His cheaper product, made in a tiny adapted whisky distillery, was now called
carbon oil and with his previous selling experience, he obtained increasing acceptance of his
special lamp with oil rock illuminant (which came with a special lamp) driving these to the first
sales of oil as energy source in America. Another pioneer, Charles Lockhart who in 1961 built the
first commercial scale oil refinery, produced 250 barrels a day making the starting point in the
industry and the birth of a new economy to come. (Mann, 2009)
While before Kier, Drake and Lockhart were working in USA, in the other side of the ocean, Ignacy
Lukasiewicz using Dr. Abraham Gesner techniques also produced kerosene in 1853 from wells in
Poland and in Romania 4 years later where they built their first distillery which product was used
in public lamps of Bucharest. (LESCAROUX & RECH, 2013)
Nevertheless, the big guy of the oil industry was still to come a 23 years old born in the state of
New York, whose first work was as bookkeeping and has the name of John Davidson Rockefeller.
(Chernow, 1998). It was in 1862 when he first arrived to Titusville and soon he founded in
Cleveland, Ohio a small refinery where they improved the method using sulfuric acid for avoiding
the lamps to smoke. They soon founded the Standard Oil Company of Ohio with a value of
1.000.000 USD grouping two refineries and a distribution company altogether managed just 10%
of Cleveland total refining capacity. (LESCAROUX & RECH, 2013).
Doing a parenthesis, its important to mention another key element in the economy of these
days: the locomotive. A British invention of Richard Trevithick, that lead to the first successful
train made by George Stephenson using steam technology was introduced in Baltimore in 1828
with direction to Ohio (U.S. History, 2014), becoming an essential driver in the Industrial
Revolution, and of course in the nascent oil one.

Honoring the name of the company, Rockefeller made huge effort in standardizing the product
following to obtain a high quality product and a good image of his company. It is believed that
great part of his success was due to his high standard of organization and an accurate
understanding of the market. Moreover, the railroad would soon became one of the main factors
enabling Rockefeller to reach such growth when analyzing the costs of his product he observed
that the rail transportation made the product more expensive compared to the oil produced in
Pennsylvania (LESCAROUX & RECH, 2013). In response, the efforts were concentrated in a
partnership with the surrounding refineries of Ohio creating the South Improvement Company
that negotiated a large discount in the transportation cost with the railroads companies. During
this period a bunch of competence moves are accounted to be made by Rockefeller with the
railroads: in a multidirectional string fight between competitors bribery, profit pressure,
agreements of sharing competitors information and other much or less controversial methods
were made by business players (Micheloud, 2014). HE started to control more and more the
refinery business (1/5th), companies from Pennsylvania begun to build a pipeline to New York and
John responded buying the pipeline company.
By 1877 Standard Oil controlled more than 90% of the oil refineries and in 1900 between 80-90%
of the transportation and distribution business, keeping relatively cheap prices between 0.7$ and
1$/bbl. (LESCAROUX & RECH, 2013) (Popove, 2010). It was a growing but still reduced industry in
the United Stated by that time. Expansion to other countries became a reality selling oil to
Europe, Latin America, South Africa and China. With almost with no competition in the sector,
the industry encountered one competitor from another side; a huge one.
The high consuming city of New York received the first public use electric power station
constructed by a former telegraph operator Thomas Alba Edison, in 1882 (Energy Policy, 2011).
Even though Alessandro Volta was who developed the voltaic pile, and Michael Faraday the one
that create the first electric generation machine Edison brought for the first time, electric power
to the citizens followed by Westinghouse and Tesla after winning the battle of currents
(Alternating current AC and Direct current DC) (ABB, 2014).
Advantages of AC for large extension transmission and thanks to a reliable generation motor
created by Tesla enabled the construction of a hydraulic generation motor in the Niagara Falls.
After that Westinghouse purchased the rights of a steam turbine in England offering to the
factories low cost power. Soon, electrical lighting bulbs became common in households and other
appliances as the iron presented in the Worlds Fair in Chicago.
The energy consumption in United Stated started a change in sources configuration, from 1775
to 1850 the only important energy source was exclusively wood, giving the throne to coal which
became by far the main energy source with an impressive growth given the extensive use for
heating, railroads and at the end of the 19th century for electricity; finally a nascent oil and

electrical power source made their appearance in the scheme. (Figure 1: U.S. Primary Energy
Consumption Estimates by Source, 1775Figure 1: U.S. Primary Energy Consumption Estimates by Source, 1775-1910
14
12

Quadrillons Btu

10
8
6
4
2

Petroleum

Coal

Natural Gas

Hydroelectric Power

1910

1905

1900

1895

1890

1885

1880

1875

1870

1865

1860

1855

1850

1845

1835

1825

1815

1805

1795

1785

1775

Wood

Source: (US Energy Information Administration (EIA), 2012)

With the beginning of a new century, developed countries initiated with many different realities
in regards of how the previous started. A raising industrial sector leading the development of
countries and the new maturing energy sources pushing very high this growth. US economy turn
out to be the biggest one during this period, a position that hasnt lost since then. We show in
500,000

Figure 2: Largest GDP 1820-1910 in international dollars

450,000

350,000
300,000
250,000
200,000
150,000
100,000
50,000

USA

China

UK

India

Germany

F. USSR

France

1910

1907

1904

1901

1898

1895

1892

1889

1886

1883

1880

1877

1874

1871

1868

1865

1862

1859

1856

1853

1850

1847

1844

1841

1838

1835

1832

1829

1826

1823

1820

1990 International $

400,000

the following chart (Figure 2: Largest GDP 1820-1910 in international dollars how US overpassed
other stronger economies by that time.

Source: (Maddison, 2009), with own adaptations. Peaks appearing in the chart are due to lack of
data in previous and following years which are in this case set to 0.

3. Becoming an energized, rolling an unstable world.

Leading the young oil industry still new with not much regulations, Rockefeller gained many
enemies in his way. The first setback was the application of the Sherman Antitrust Act (Late 19 th
century) that prohibited any king of conglomerate organization which restricted the free trade
within the United States. (United States History, 2014), favorably Standard Oil didnt receive
much consequences with this one. In 1901 President Roosevelt ordered an investigation which
forced the dissolution of the Standard Oil trust by an Us Supreme Court decision.
Thirty four independent companies resulted from this division some of them became big player
in the business initially called Standard Oil of New Jersey, Standard Oil of New York and Standard
Oil of California became later on Exxon, Mobil and Chevron respectively. At this point Rockefeller
was in the center of the stage, and became a target for newspaper researchers, an undesirable
issue.
During this period oil began to be a miners target, in different places of the American geography
people were doing efforts to get the appreciated black oil. Particularly in Texas not many people
thought that would have been possible to find, however different efforts were made. It wasnt
until 1901 when the oil prospector captain Anthony Lucas drilled the Spindletop field up to 347
meters discovering the first major oil well in the United States with a peak production of 17.5
million barrels in 1902. The Texas Company, later Texaco emerged in those fields (Texas State
Historical Association, 2014). Oil exploration and findings expanded all over United States
highlighting the west states of the Mississippi River.
In Europe Industry was developing at the same time but in a different rhythm. One of the first
companies related with petroleum was the Shell Transport from England, initially dedicated to
standard shipping and then in oil transporter. They were importing the product from Borneo,
Russia and Japan and were the first to use the Suez Canal for oil transportation giving them and
special advantage against the big American regarding the Asian market; Rockefeller made an
offer for buying the company but it was rejected. Shell made also an agreement with Dutch Royal
Petroleum Company setting operations in Netherlands, Russia and the region of Azerbaijan which
converted the company in the provider of 75% of the oil outside US. . Another important

company in Europe was Branobel in the Caucasus region, that later disappeared after the Russian
Revolution intervention. (LESCAROUX & RECH, 2013)
By 1938 the United States produced 21 trillion barrels of oil (4.900 quadrillions of Btu Figure 3
scale) times more than the Soviet Union (the first producer by 1900) and 64% of worlds oil
consumption. In spite of this amazing growth, coal was still the first energy source in the United
State, at this point supported by the use in electrical generation; also huge spreading technology.
Around 1950 the lines of oil and coal crossed each others leaving the black liquid to go way
higher over the black solid. Between 1900 and 1920 Samuel J. Schurr and Bruce Netschert
calculated that total energy consumption in United States registered an amazing growth of 123%

x 10,000,000

Figure 3: Main oil producer countries 1900-1950 in Mbtu

1,200,000
1,000,000
800,000
600,000
400,000
200,000

United States of America

Venezuela

Russian Federation & U.S.S.R.

Iran (Islamic Republic of)

Saudi Arabia

Kuwait

Mexico

Indonesia

Iraq

Romania

Colombia

Brunei Darussalam

Canada

Argentina

Trinidad and Tobago

Egypt

(A, 2004)
Source: (Benichou, Rech, & Heyris, 2014). Own database construction

Although the great vision of Rockefeller, I dont believe he imagined back then in 1862 who was
going to be the great driver of his distilled product: the automobile of Henry Ford. In 1903, Ford
Motor Company was founded (Same year of the Wrights Brother first successful airplane) and in
short revolutionized the life of Americans, and the life of all actual livings, through the creation
of an affordable motorized vehicle, capable of transporting individuals as they pleased. The
advances in technologies after the combustion engine were very rapid, one of his first
achievements was the launching of a moving assembly line in 2014 that allowed to build a car
(The model T chassis) in 1 hour 33 minutes, something incredible for almost everybody. By 1920

1950

1948

1946

1944

1942

1940

1938

1936

1934

1932

1930

1928

1926

1924

1922

1920

1918

1916

1914

1912

1910

United States possessed 50% of total world existing automobiles, 60% of them were ford. (Energy
Policy, 2011)
The industry diversified itself rapidly, creating tractors, farm vehicles, trucks and other adapted
vehicles as. Almost all engines were using the distilled product, and since the fever for cars
steadily soared, oil companies were also skyrocketing. From 180.000 passenger cars sold it in
1910 the industry reached an amazing 4.500.000 of cars sells in 1929. Winston Churchill
demanded for the construction of one of first armored vehicle, the tank for introducing it in war.
Airplane, and specially ships were designed for using oil as propulsion energy instead of coal.
Churchill needed to develop a trustful fleet, and intended to buy Shell and end it up buying a new
oil company operating in Iran, called the Anglo-Persian Company that was going to be name
changed for British Petroleum the actual BP. World War was also influenced by the power of oil
in any kind of earth, air or water vehicle becoming and sensible supply for strategy decisions.
Churchill said in 1913: If we cannot get oil, we cannot get corn, we cannot get cotton and we
cannot get a thousand and one commodities necessary for [...] Great Britain and the an
American president in 1924: Calvin Coolidge in 1924, the supremacy of nations may be
determined by the possession of available petroleum and its products. (LESCAROUX & RECH,
2013)
The important role oil played for geopolitical matters, plus the reduction in soviet production
pushed up the price of the black gold, going from $0.8/b in 1914 to $3.1/b in 1920. But suddenly
the development of Middle East deposits, conducted to a global overproduction making the two
major players (Standard Oil and Shell) to fight fiercely in prices moving back the global oil price
to $1.2/b. Prices soon stabilized. In 1952 and investigation revealed that an agreement made by
those big companies was the cause of the quick price stabilization in 1935. They agree each other
to work together for making the highest profit possible avoiding the competence in the market.
(LESCAROUX & RECH, 2013). The US government in response to these kind of fixing, imposed the
oil price from extraction in the Gulf of Mexico as the international price, they could do it because
they managed the biggest part of the industry and the consumption.
From 1940, when oil exceeded coal as main energy source the industry became a huge global
market controlled by few companies all of them coming from the powerful economies of that
time (Great Britain, France and United States). In fact, just 7 companies in the world were
managing a great part of world economy The Seven Sisters: The Anglo-Persian Oil Company (BP),
Gulf Oil, Standard Oil of California (SoCal) and Texaco (Chevron), Royal Dutch Shell, Standard Oil
of New Jersey (Esso) and Standard Oil Company of New York (Socony) (ExxonMobil) all of them
signatories of the Red Line Agreement (US Department of State, 2014) stating that none of them
will pursue oil interest on the Middle East for not fighting for a market advantage between
themselves risking the loose their position, and this represented the first cartel of oil also known
as the The Consortium of Iran; the controlled 85% of world oil reserves.

As oil became the driver of world economy, price rate became a one of the most important
economical index in the world. We can see in Figure 4: Crude oil prices 1861-2012. USD/barrelthe
price index timeline from 1861 to 2012. Current prices are similar to those from the beginning of
Figure 4: Crude oil prices 1861-2012. USD/barrel
140
120
100
80
60
40
20

1861
1864
1867
1870
1873
1876
1879
1882
1885
1888
1891
1894
1897
1900
1903
1906
1909
1912
1915
1918
1921
1924
1927
1930
1933
1936
1939
1942
1945
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011

$ money of the day

$ 2011

the oil market and oil prices around 1980. In the beginning the product was sold in little volumes,
but since it started to become a mass production product its prices lowered in a great way, until
the mentioned peak in the 80s and now. From this point well use this series as the timeline
reference.
Source: (BP, 2013)

Aware of the strategic role of oil, the constant dilemma of scarcity or abundance begun and so a
variety of product composition and technologies for extraction and production. Thermal cracking
technology was introduced around 1913 developed William Burton and Robert Humphreys
working for Standard Oil (Greatest Achievements, 2014), waterflooding techniques for boosting
oil recovery, blends as the ethanol-gasoline in 1922, German technology of liquefaction and also
the discovery of shale gas which was abandoned because it wasnt necessary at that time because
the boom of other fields. Offshore extraction initiated in 1946. Moreover the creation of the
petrochemical industry increased the uses of petroleum.
Imports of oil before 1945 were almost null, and the internal demand was growing very fast (80%
approximately) especially in gasoline for cars which represented the main consumption product.
The discovery of oil in other parts of the world made the price go down and cheaper petroleum
was available (Kuwait, Iran, Saudi Arabia, Mexico, Venezuela) for American consumers leading to
an increase in imports up to 12% in 1950. For benefiting the oil produced abroad in the United
States Market, the Internal Revenue Service approved the elimination of several taxes which

augmented the pumping from Middle Eastern countries. Importing was becoming more usual
and when US became a net importer around 1950, the government of President Dwight
Eisenhower responded imposing quotas for imports. (Energy Policy, 2011).
The first half of the 19th century led a world with a spreading oil industry with many countries
developing its tremendous reserves, although they werent exactly aware of how much it was
going to be. A high development on technology for the industry, at the same time they were
building facilities around the world. Stable price, a global oligopoly and a strategic game set
economy players.
United States was now oil dependent country.

Figure 5: Primary Energy Consumption Estimates by Source, 1900-2012 (continuation)

45
40

30
25
20
15
10
5
0

1900
1910
1920
1930
1940
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011

Quadrillons Btu

35

Petroleum

Coal

Natural Gas

Wood

Nuclear Electric Power

Other Renewable Energy

Hydroelectric Power

Source: (US Energy Information Administration (EIA), 2012)

4. Big bang of oil industry and markets

In 1950 United States was by much the most oil industry developed country, and now a
dependent of it Figure 5: Primary Energy Consumption Estimates by Source, 1900-2012
(continuation). Nevertheless the establishment around the world was coming with the

construction of more than 200 new refineries and with shipment of more than 1.750 tankers,
each one with more capacity than the other. Cars were the engine for this high consumption of
gasoline with 2.5 billion of them in the world (Parra, 2009), but now was sharing the pie with
merchandise ships, airplanes and other type pf motorizes vehicles. In Europe and Japan oil also
overtook coal position, in total 11 millions of barrels per day were being consumed in the world.
The end of WWII, the reorganization of the economic system with the end of gold age and the
souring of the black one, the black gold. The vast discovery of reserves, the technology for
extraction and production and the transportation system were in place to offer cheap oil around
the globe. Traffic and CO2 emissions were not a concern
The business was still being ran by the same few major firms. States started to become aware of
the companys revenues and were asking for increase in their profits. Concessions were the type
of agreements that these firms used for exploiting international reserves. They created holdings
associated with the state and always another company of the major was in the associations for
making and interlinked corporation1.
Some little companies were beginning to participate in the market, at first just in a very limited
way. The Italian state owned ENI was offering better financial terms in the concessions thereby
winning some oil concessions; others independents followed these methods. The research for
this new gold brought another reserve countries as Libya and independent American companies
gained participation here, where changes in the setting price were held. Soviet Union countries
were also entering in the market and for doing it they needed to offer interesting discounts, so
different prices were being placed and with it the first signs of competence in the market. In the
Libya, they asked for calculating their profits with respect to the price market, and not the usual
fixed price.
The new firms took advantage of the growing market. In 1950 the seven sisters share outside
Canada, USA, URSS and China was 85% in 1950 and ten years later 72%. In the refinery industry
they passes from 72% to 53% in the same period (Chalabi, 2004).

Each of these companies was a shareholder in other countries in the Middle East. For example, BP owned half of the Kuwait Oil Company and
all the oil of pre-Musadeq Iran (although its holding was reduced to 40% in the consortium that was founded after Musadeq) as well as shares in
Qatar Petroleum Company and Abu Dhabi Petroleum Company, whereas the American company Esso (Exxon) had 30% of Aramco in Saudi Arabia
as well as shares in Qatar Petroleum, Abu Dhabi Petroleum, and the like. This type of interlinking enabled them to control and manage crude oil
supplies worldwide, along with the bulk of oil exports from the major oil-producing countries, so that oil trading became a question of
intercompany exchange with no free market operating outside the companies to control whereby crude oil was exchanged between sellers and
other buyers. At the same time, each of these sisters had its own downstream operations transportation, refining, oil products, and
distribution networksthat made them vertically integrated. This compact system of horizontal and vertical integration allowed the companies
to plan for their future crude oil requirements in line with their downstream requirements, that is, the amount of oil products needed by each
according to its market outlets in the countries to which crude oil was shipped. (Chalabi, 2004)

This market openness coincided with global efforts, especially countries involved in WWII, to
make an economic system of cooperation which was pushed strongly by the American expanding
policy of free markets around, and later on the end of the Bretton Woods system.

The American economy was changing too, since they were a world exporter power before 1950
from that time on the supply balance changed directions becoming an economy depending on
imports of goods and services. In Figure 6: U.S. Trade in Goods (not services) as % of GDP - Balance
of Payments (BOP) Basis 1900-2012we can observe the evolution of the goods trade balance from
1900 to 2012 highlighting the fact that 1943 was the last high point from a decrease that has held
ever since in negative state.
Figure 6: U.S. Trade in Goods (not services) as % of GDP - Balance of Payments (BOP) Basis 1900-2012

8.0%
6.0%

4.0%
2.0%

-2.0%

1900
1903
1906
1909
1912
1915
1918
1921
1924
1927
1930
1933
1936
1939
1942
1945
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011

0.0%

-4.0%
-6.0%
-8.0%
Balance goods trade % of GDP

Source: (United States Census Bureau, 2014), (UN, 2014)2 (ECON DATA US, 2014), own data
comparison and database construction

During the decade of 50s several European colonies were gaining independence in the Middle
East and North Africa. Moreover, these political issues were occurring in oil producer nations
which were imposing nationalism shift starting with Iraq overthrowing the monarchy in 1958,
Algeria became independent in 1963 and Libya in 1967, where oil was used as a political weapon

This publication is only available as a draft paper and it is indicated that The data contained in the present paper should be regarded as
preliminary, it is requested that no use be made of them until final publication. Yet, the paper appears to be based on solid research and it is the
best source for historical data available to us. Nevertheless this information is provided without assuming any responsibility for the accuracy of
the data and only as a special service to interested users which can use this data under their own responsibility and according to their own
judgment.

(Six day war). These new nations were among the fifty three countries that were producing
around 20 million of barrels of oil per day (1960), just 17 of them almost 100%.

Table 1: Top oil producers by 1960

Country

Mbbl/d

Percentage

Under this context, of political changes,

oil market configuration and lowering
prices (Figure 4), on September 1960
delegates from 5 major oil producing
countries (Iran, Kuwait, Saudi Arabia,

United States of America

6,814.84

33%

Venezuela

2,924.96

14%

Russian Federation & U.S.S.R.

2,895.58

14%

Kuwait

1,661.16

8%

Saudi Arabia

1,263.60

6%

Iran (Islamic Republic of)

1,047.58

5%

Iraq

929.48

5%

Canada

499.41

2%

Indonesia

407.36

2%

Mexico

271.83

1%

Romania

225.22

1%

Venezuela, and Iraq) gathered on

Baghdad founded the Organization of
Petroleum Exporters Countries (OPEC).
The purpose was OPEC's objective is to
coordinate and unify petroleum policies
among Member Countries, in order to
secure fair and stable prices for
petroleum producers. Some experts
argue that the trigger for the OPECs
conformation was two successive price
cuts imposed by the 7 sisters, the first
one a 10% cut and the second of 7%
(Chalabi, 2004). Actually the main prime
objective was to safeguard their member
countries' oil revenue against any further
erosion as a result of the companies'
deciding to cut prices further.

Argentina

178.81

1%

Source: (Benichou, Rech, & Heyris, 2014)

Algeria

169.01

1%

Qatar

160.79

1%

Colombia

148.45

1%

4.1. OPECs role

Such power of the seven sisters didnt

allow to think that the OPEC was going to
play a major role some years later. In fact
Germany
108.30
1%
at that time they werent capable of
Other 36 countries
784.56
4%
accomplishing its creations objective.
After the 5 founders, soon were added to
the list Qatar, Indonesia, Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador, and
Trinidad and Tobago

117.31

1%

Gabon (Ecuador and Gabon quitted around the 90s). With this enlargement started to
gain stage for negotiation with the 7 majors.
Some gained steps began to come, as they implemented unification in tax systems based
on price market rates, which made the new entrants to pay higher taxes than they did
before. They imposed a rule already established in US, where companies had to paid
royalties to the oil land owners regardless profits were realized or not. Chalabi (2004)
argues that some of this taxations measures not only help OPEC to stop prices cuts but
also to strengthen the price structure and the end to expansion of competitive markets
having an effect of maintaining major companies power and reducing chances to new
entrants, which were part of the cause of price instability. Viewing now, this picture then
OPEC pursued price stability not imagining how high prices could have gone. ($120/barrel
2011)
Prices did not go back to the price rates they had before the cuts but member countries
were amending some contractual holes of disadvantages they had in the concessions.
Prior to OPEC, host countries were not partners in their own industry and their role did
not exceed the levying of taxes from the oil companies (Chalabi, 2004). Moreover, in
1966 OPEC signed a statement, giving its country members the right to set prices
unilaterally in order to give states a major role in the development of the industry; a right
that any other single market product have but oil. (Fair agreements imposed by the
developing companies?).
The first 10 years of OPECs existence helped to improve the state role balance and their
relationship with the big companies, at least in moderated level, until this point serving
both interests. OPEC state members passed from being tax collectors, to prices defining
actors.
Now in 1970, the ambiance changed, member states after achieving a stability of prices
started a series of negotiations with the companies with the intentions of raising the
prices and increasing taxes. It was supposed to be revised every 5 years but with USD
devaluations, they were adjusted after 1972 and 1973. Inflation was also considered in
the price so that their currencies were able to maintain its value. With these measures
price remained stable until June of 1973.
The Tehran signed agreement was based on fixed posted price, but the market price had
reached very high levels and OPECs manifested that the price differential should be
share between the associates. The big majors refused to accept a change on the
agreement and four month later they applied the statement that dictated the power to
set the price unilaterally and they announced an increase of 70% passing from
$3.2/barrel to $5.4.

This decision occurred at the same period of war between the allies Syria-Egypt against
Israel. United States and Netherlands decided to defend Israel fact that triggered a politic
reaction against using oil as a weapon that lead to a decision of placing an oil embargo
to the United States of America. An unexpected consequence resulted from this, not by
the effect but because of the level, when oil prices soared in a striking way.
Market prices reaches $15/barrel and OPEC members did so in a more moderated way
led by the Iranian position of raising prices substantially in this case up to $10.84/barrel.
The effects were very wide from consumption reduction policies, increase in gasoline for
car prices reaching the end consumer becoming a very high product. In the other hand,
sales volumes reduced dramatically reducing states incomes in the same level. Europe
decreased 8% of its consumption, way more than Japan and USA that had less taxed oil
end use products. Just few years later people got quickly used to high prices, retaking
their normal consumption rhythms. In 1970 another shock in prices due the Iranian
revolution pulled again the oil price because the offer reduction.
OPEC, acting rationally, sat some temporally additional cost to the price given this,
considered unusual, situation but market prices kept ricing and the additional cost
remained inside. In 1979 in the Caracas meeting, prices had reached $24/barrel and a
year later $36/barrel. The world started to understand that this situation was becoming
steady so the awareness of the need of changing such dependence arise. The
development of new providers, new energy sources, low consumption technologies and
habits was the result, not that much yet for end users, as the world was still growing very
fast in a high international investment context and global trade.

Figure 7: World and U.S. oil consumption. In another scale oil prices (1965-2012) (Thousand barrels daily, $)

100,000

120

90,000
100

80,000
70,000

80

60,000
50,000

60

40,000

40

30,000
20,000

20

10,000

World

US Consomption

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

1969

1967

1965

Prices

Source: (BP, 2013)

Later on, OPEC decided to establish a system of quotas where they were committed to
produce a defined volume in order to fulfill the what the outside OPEC producers
couldnt satisfy; a kind of last resource supplier. In 1983 the new scheme was introduced,
with a $28/barrel and 17.5 million barrels/day Saudi Arabia was left as the swinger
producer being in charge of supplying the extra volumes and using its price as new
market reference. Being the swinger, members expected that Saudi Arabia were in
favorable position for making profits, but demand was so low that they ended producing
way less than the capacity suggested; just 2.5 million barrels/day when they could
produce easily 8-9 million barrels/day.
Price was still high and reserves production from outside OPEC producers increased
because the with such price investment was highly profitable, so a larger capacity was
installed at the same time that vast amount of research and enhancing consuming
technologies were introduced enhancing the oil rate use. In 1985 OPEC sales were at half
as they were 6 years before and the situation became unmanageable induction the Saudi
Arabia reaction of leaving the quota system and adopting a market oriented pricing
model. As expected, the volume available rose very quickly making the price to drop to
$8 per barrel (The Arabian Light) and pressures against them in the same way. Almost all
members were asking to revert their decision and later the pressure was coming also by
US producers that with much larger prices, were closing their production sites and in
Texas for example an oiled economy state, recession was impacting in a deep way. Even
in the new oil developing areas as the north sea were investment were made using higher

prices, so they were being unable to sustain the payback of investments. Finally they had
to readopt the quota system and price reached an $18/barrel
By 1987 the system was updated setting a scheme of pricing made by a basket of oil from
member productions and then abandoning the fixed price model to a system where they
were adapting the price to a target. This brought also the differentiation of oil prices in
regards of its quality and transportation costs, bringing also a global agreement of how
things were running, lowering discussions and pressures among OPEC members although
they were now not following its creation objective of price stability.
From this point the price and production have been ruled almost by a similar system now
a global commodity, the largest single one, which was responding to global economy
behavior and highly immersed in the geopolitical game. As Chalabi (2004) recalls the high
volatility of prices around this period was coming from political instability: the first shock
in 1973 because of Arab Oil Embargo, the second by the Iranian Revolution in 1979, the
Iraqi invasion of Kuwait in 1990. Until the XXI century were similar scenarios but with a
constant raise in prices has been the dynamic; well see later on the recent movements.

5. An oiled trade balance?

In a growing trade world, especially in fuels and mining products, (Figure 8, excludes automotive
products and manufacturers) oil was becoming the single most traded commodity in the world,
(by value) and of course United States, the largest economy in the world, the first consumer of
oil in spite of being one of the three main producers.

200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000

Fuels
Agricultural products
Clothing
Food
Iron and steel
Pharmaceuticals

Fuels and mining products

Chemicals
Electronic data processing and office equipment
Integrated circuits and electronic components
Office and telecom equipment
Telecommunications equipment

Source: (World Trade Organisation, 2013)

Forty percent of US energy consumption is in oil and for transportation 97% comes from it
(Securing America's Future Energy, 2006). Its clear dependency has classified the energy supply
a matter of National Security and its management is maybe the most strategic process in for the
American government.
The use of this vast amount of energy is an empirical evidence for all modern growth theory
which assumes that GDP growth per capita is driven by technological process and capital
investment, an update from the standard theory of capital and labour, bringing the concept of
technology-enhanced labour productivity (Robert, Jeroen, Dietmar, & Benjamin, 2013). Its very
important to highlight that energy is not just the consumption as a driver of the economy, but
its even more important understanding the role that energy plays in the industry, services and
by the economic importance of energy itself as a huge industry.

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

0
1980

x 100000000

Figure 8: World commodity trades by group of products (1980-2012) ($)

Thus, even though energy efficiency has improved lowering the energy intensity (Energy
use/GDP) the US economy curve owes great part of its growing rhythm to the curve of energy
consumption-production. Figure 9.
Figure 9: US GDP and energy consumption (1965-2012)
18,000,000

2500.0

16,000,000
2000.0

14,000,000
12,000,000

1500.0

10,000,000
8,000,000

1000.0

6,000,000

4,000,000

500.0

2,000,000

GDP current US$ Million

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

1969

1967

1965

Primary Energy: Consumption (MTOE)

Source: (World Bank, 2013), (US Energy Information Administration (EIA), 2012)

Nonetheless, US economy have been dealing with a competitive loss, since their products being
exported area a lot less than what theyre importing and the amount that exported services
added for a while is reduced compared to what they need as economy. This has been impacting
the debated American deficit and how the economy can prevail with such unbalances. Recent
financial and real state crisis increased the concern about this issue.
The relationship between energy (oil) and the deficit is that the trade unbalanced is produced
mainly because the huge amount of oil US needs for running its economy that multiplied by a
steadily international market oil price flying over the border of $100/barrel since long time with
not expectation of a downturn in its value for the coming years. In this sense, the problem of
deficit is that for keeping the same economy levels you need to finance the deficit with debt and
this means you have to pay interest making final prices higher for Americans. Even more complex
is that if you keep increasing your debt, and you dont have the means for generating surplus you
wont be able to pay the debt in an hypothetical case that your dont find more acceptable
borrowing. So, what would happen if prices keeps its accelerating rhythm in the following years?
Since 2004 the United States trade balance deficit started to increase in an extraordinary way
changing for example from 2003 to 2004 in more than 23% reaching a peak of $752 billion in
2005. The slow down on the economic activity made return the deficit to a lower state in 2009

but at first sign of recovery the tendency was regained with an increase of 43% from 2009 to
2011 registering a value of $556 billion by that year (Figure 10).

Figure 10: U.S. Trade in Goods and Services - Balance of Payments (BOP) Basis $US (1960-2012)
400,000
200,000

-400,000
-600,000
-800,000

-1,000,000
Goods BOP

Services

Balance

Source: (United States Census Bureau, 2014)

We can observe how since 1982 when oil prices start to play in the market game, US trade
balance became negative recovering the trend in 1990 and just 2 years after the negative line
went far away from 0 and has come back ever since, not even close. Services balance has helped
to reduce the gap in the goods export/import balance but is still litle. By 2008 18% of US imports
were in petroleum products and represented 65% of the US deficit, heading 2012 $414 billion
were spent on petroleum, 15% of US imports and 78% of US deficit. (United States Census
Bureau, 2014) (US Department of Commerce, 2013)
The price raise of oil strongly affects US economy through the extended bill for importing fuel
that directly hit the trade balance and its deficit. As prices increases the relationship between the
deficit and prices become augments, using the oil data and deficit report we can standardized
those time series variables for observing the fluctuations between them. In this exercise I want
to show if there is a correlation between them and we find the following chart. Since 2000 the
lines crossed each others and their movements have similar patterns we can infer an association

2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

1968

1966

1964

1962

-200,000

1960

in both series as we have argued before that great part of US economy depend on oil prices and
fuel imports.
Figure 11: Correlation patterns between oil prices and the US surplus/deficit
4.00
3.00
2.00

1.00
0.00
-1.00
-2.00
-3.00
Standardized oil prices

Standardized Surplus/Deficit

Source: (United States Census Bureau, 2014), (US Department of Commerce, 2013), own creation

Having shown with all the indicator measures and the analysis of data, we can notice the
influence that oil have in US economy from 1950 to this point, and having seen all trends we can
expect that its energetic environment and consumption patterns are going to stay alike for many
more years. The question arising is how is the United States government going to control the big
topic of the deficit and how the National Security strategic game is going to run for guaranteeing
stabilization in the economy. We wont address all the measures and policies the US cabinet can
deploy, however were going to aboard an interesting maturing oil production which is starting
to invert the oil import trends in US and that despite critics and skepticism is showing some real
and strong signs; the shale oil and gas.
In the following subsection it is presented an analysis about the sustainability of the current trade
unbalanced, the current US debt and possible scenarios for the nominal interest rate.

5.1. Exterior deficit analysis

Based on an exercise published by Fernandez (2007) evaluating the sustainability of US
foreign deficit I projected different scenarios that US may face keeping actual and similar
variables in its economy.

Equation 1: Debt level projection

1+

Model of level of debt:

D=debt level in year t
i= nominal interest rate
X=Sum of deficit
g= nominal growth rate
Y=GDP
Source: (Fernndez, 2007)

We came up with this results using actual values (Fernandez were until 2006), where we have
from one side (left) different scenarios up and down from US current nominal interest rate,
and in other side (top) different trade unbalanced percentage also centered on current values
and projecting values up and down from it. The results extrapolate the current debt with a
GDP growth rate of 4.7% (ten years back average), the interests and commercial trade
unbalanced explained above.
Table 2: US debt level projection with a growth rate of 4.7%

Nominal interest rate

Commercial dficit (GDP %)

1%
0%

No

No
29%
39%
63%
158%

1%
2%
3%
4%
5%

2%

No

3%

No
57%
79%
126%
316%

No

4%

No
86%
118%
189%
474%

No

No
114%
157%
252%
632%

No

Source: own calculation and database construction

5%

6%

No
143%
197%
315%
790%

No

No
171%
236%
378%
948%

No

7%

200%
275%
441%
1106%
No

No values are negative debt which is incorrect for the calculation. As the tool created for projecting the debt
is adaptable for any country, there is a wider range which in critical cases as the US just focus in central values
(red bars)

As it is shown in Table 2: US debt level projection with a growth rate of 4.7%an economy with
current US indicators and keeping the commercial unbalanced will be unsustainable in medium
and long term.

6. Fracking the economy

Its very common to hear nowadays about the shale gas (or shale oil) especially if youre in the
industry, for those who dont, shale gas or oil is the same product that we have recovered for
many years but this one is found below the common layer and is trapped in a shale which is
formed by fine-grain sedimentary rock; its like a hard rock being before the oil in the ground
layers. The fun think about this, is that the shale is too complicated to pass in regular drilling
technics, so a special process is been developing allowing to break the shale and obtain the
precious shale energy; with a very controversial and expensive process known as fracking.
As we mentioned in section 3, this type of oil is not new, it was discovered long time before but
thanks to abundant reserves in less deep deposits, and given the prices back then, the recovery
wasnt economically feasible. Conditions has changed, although world reserves are still huge, the
easier extracted kind are becoming less and less, so scarcity concerns has arisen in many different
reports and studies; and its easy to understand what happen if countries think that youre
running out of oil. In US geography oil is not enough, or at least the common reserves werent
enough, and being the first consumer of the world, the main importer, a country with a high trade
balance deficit and always political risks any investment aiming to soften this scenario worth to
risk.
We wont go further talking about the technical matters of shale fuels and the fracking, just a
summary of what is in discussion will be presented. The focus then, will be to show the current
US oil supply and to draw a scenario where shale gas become a great volume source of energy
enabling to reduce US commodities expenses weather by reducing imports or even enhancing
the trade unbalance by exporting shale oil and gas. The big hole we have seen in previous charts,
and then the deficit could change and clean its face. Just few things about fracking

Shale gas an oil are the same product as the one we have used since its discovery
Its actually obtained using a fracking method
Fracking methods exist since 1930 approximately
A recent advance on the technology, created the horizontal fracturing that makes
the process economically reasonable
Horizontal fracking is been highly controversial, mainly arguing that the use of
chemical processes contaminates water sources.
Recent research have been made in order to prove or disapprove the findings of
chemical products in the water. Some have been found, none has been sufficiently
powerful to revert its use or to increase the opposition campaign against it.

In France an UK has been a recent big debate, the first one officially disapprove
the use of it, the second is already approved and oil 7 gas companies are already
in place

This picture is making now a real impact, given that the technology was placed several years ago
and were actually starting to feel the influence of this important development. We can see in
chart Figure 12 the evolution of US production and imports where we can noticed that around
1995 imports became the main supply source but especially we want to focus in the reduction of
imports and the growth on production shown in the last 4 years. Are they going to become closer
or its a temporally effect due to crisis and high prices? Or are they going to crossed each other
bringing benefits to the America economy?
Figure 12: US oil imports and production (1910-2012)
12000

10000
8000
6000
4000
2000

U.S. Field Production of Crude Oil (Thousand Barrels per Day)

U.S. Imports of Crude Oil (Thousand Barrels per Day)

Source: (US Energy Information Administration (EIA), 2012)

The big part of shale oil is being recovered as gas, we can see Figure 13 that the difference in
increasing total volume is been given by Shale gas sources, it worth to mention that tight gas is
also recovered using fracking similar procedures. From a total of 8.3 trillion ft in 2012 added by
shale gas EIA estimates that will be the double for 2040. With this figures oil should growth to
9.6 million of barrels per day, reaching US record in 1970 (Financial Times, 2014). In the same
report the EIA director said that the share of US oil liquid consumption was 60% from the total in
2005 and should decrease to just 24% in 2015. With this results the oil & gas industry received
the approval for initiating exports of liquefied natural gas (LNG) summing to the positive side of
the trade balance (LNG price could be between 5-8 times less than oil prices)

2012

2008

2004

2000

1996

1992

1988

1984

1980

1976

1972

1968

1964

1960

1956

1952

1948

1944

1940

1936

1932

1928

1924

1920

1916

1912

1908

1904

1900

Figure 13: Natural gas production by category (1990-2012) in trillion cubic feet per year
30.00

25.00

20.00

15.00

10.00

5.00

0.00
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Non-associated onshore

Associated with oil

Coalbed methane

Non-associated offshore

Alaska

Tight gas

Shale gas

Source: (US Energy Information Administration (EIA), 2012)

Last November (11/2013), The US Commerce

Department informed of a drop in the US Figure 14: Top 10 countries with technically recoverable
shale gas resources (%)
deficit to $34 billion almost an 8% thanks to
the drop in oil imports in total the first 11
4%
month of 2013 US saved around $40 billion
5%
19%
raising US economic GDP expectations to
7%
growth by 3.5%. (Forbes, 2014). Its risky to
8%
make projections of what would happen with
this US energy balance improvement will lead
14%
9%
to, but its clear that is significant helping to
overcome US economic deficit. What is sure
10%
12%
is more changes will come, because US
12%
reducing its dependence of oil imports and
becoming an energy exporter will surely
China
Argentina
Algeria
U.S.1
affect global energy prices and also the
Canada
Mexico
Australia
South Africa
geopolitical game. As American say time flies
Russia
Brazil
like an arrow, I believe that by the following
years or month we should keep track of what
Source: (US Energy Information Administration (EIA), 2012)
shale fuel and US energy will bring us,
because it could play an important role again
in global economy. Highlighting that who holds the biggest shale gas recoverable reserves so far.

7. Conclusions
Were all sure that energy will remain a fundamental part of our living, we know that oil wont
last forever and that by end of this century we will have less oil & gas fuels than we had in 1900.
Technology in exploration, extraction, distribution, consumption will play a big role for extending
actual reserves and developing alternative sources, as the shale fuel who will certainly add
volume to the equation, not only because of the power it could generate but because is starting
to push hard in recovery and strengthening the American economy. The controversial subject of
US trade balance and their deficit could add another section of global debate.
Other big and medium countries with shale reserves, yet not that developed in facilities and
techniques, will influence in positioning their economies in the field. Oil will keep us managing
and discussing around him, we may start to think after it.

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Illustration list
Figure 1: U.S. Primary Energy Consumption Estimates by Source, 1775-1910 .............................. 8
Figure 2: Largest GDP 1820-1910 in international dollars .............................................................. 8
Figure 3: Main oil producer countries 1900-1950 in Mbtu .......................................................... 10
Figure 4: Crude oil prices 1861-2012. USD/barrel ........................................................................ 12
Figure 5: Primary Energy Consumption Estimates by Source, 1900-2012 (continuation) ........... 13
Figure 6: U.S. Trade in Goods (not services) as % of GDP - Balance of Payments (BOP) Basis 19002012 .............................................................................................................................................. 15
Figure 7: World and U.S. oil consumption. In another scale oil prices (1965-2012) (Thousand
barrels daily, $).............................................................................................................................. 18
Figure 8: World commodity trades by group of products (1980-2012) ($) .................................. 21
Figure 9: US GDP and energy consumption (1965-2012) ............................................................. 22
Figure 10: U.S. Trade in Goods and Services - Balance of Payments (BOP) Basis $US (1960-2012)
....................................................................................................................................................... 23
Figure 11: Correlation patterns between oil prices and the US surplus/deficit ........................... 24
Figure 12: US oil imports and production (1910-2012) ................................................................ 27
Figure 13: Natural gas production by category (1990-2012) in trillion cubic feet per year ......... 28
Figure 14: Top 10 countries with technically recoverable shale gas resources (%) ..................... 28

Table 1: Top oil producers by 1960............................................................................................... 16

Table 2: US debt level projection with a growth rate of 4.7% ...................................................... 25