In 1859, oil was discovered in Pennsylvania and the world’s modern oil industry was born. But it was not until the internal combustion engine was developed that oil became essential.

It was decisive in the First World War. In November 1918, UK cabinet minister Lord Curzon stated: “The Allied cause floated to victory upon a wave of oil.” The hydrocarbon fuelled allied navies and tens of thousands of allied vehicles.

The end of the war found the allies holding the Arab territories of the Ottoman Empire. Oil was discovered near Kirkuk in 1927. By 1940, many of the largest oil reservoirs in the Arab world had been located.

US demand

For the US, Middle East oil was seen as the solution to a looming American energy crisis. Domestic production was rising, but not as fast as demand, and imports grew rapidly after 1945.

In 1970, they stood at about 1 million barrels a day (b/d). By the end of the decade, the figure was 7 million b/d.

After the Arab-Opec oil embargo of 1973-74, the US acted to cut oil dependence, but higher prices were the main reason imports slumped. A new surge of imports followed the 1986 oil price crash.

In 1995, imports for the first time outstripped domestic output. By 2005, the US was importing almost 11 million b/d of oil. Domestic production in 2010 was down to 4 million b/d. Then a miracle happened. Technology enabled US producers to exploit tight oil.

US production

Stimulated by the swift oil price recovery after the 2008-09 global financial crisis, domestic output soared. The price crash of 2014-15 again proved to be a temporary impediment.

US oil production is forecast to average more than 10 million b/d in 2018 for the first time in almost half a century.

The recovery in the US’ petroleum industry preceded President Donald Trump’s election, but his administration is pursuing a policy designed not only to end America’s oil import dependence but to make the US dominant in global energy.

Restrictions on exploration, development and transport projects are being lifted. America has started gas exports and will soon become a net energy exporter. According to BP’s annual energy outlook forecast, US gas will account for one quarter of the global total by 2040. More than a quarter of the increase in world liquefied natural gas exports between now and then will come from the US.

Future outlook

There is no prospect the US will stop importing oil, even as purchases from Opec decline, but the wheel of energy history is turning. Rising domestic production and the start of large gas exports will reshape world energy.

For the first time in more than seven decades, the US is freeing itself from fear of oil running out or being blocked. Washington’s energy policy is now being shaped more by global opportunity than threat. The implications are enormous and for no region more than the Middle East.