HUGE AS IT may be, U.S. crude-production potential is still insufficient to allow for the much-sought-after goal of U.S. crude-oil independence—the only missing point in the overall equation of U.S. energy independence. America is already largely self-sufficient in terms of all other primary-energy sources (coal, nuclear, natural gas, NGLs, etc.), while it still imports about half of its daily consumption of crude oil, which is now a little more than 15 MBD. True, imports have plummeted steadily from their peak in 2007 (when they outpaced 10 MBD), and they will continue to decline in the next few years. However, even in the most favorable scenario outlined above, 25 percent of U.S. crude-oil requirements will have to be imported in the future.

This implies that if the United States wants to target the highest degree of oil security, it should rely not only on an increase of its domestic crude-oil production, but also on energy-efficiency measures that could curtail crude-oil consumption. Together with a structural shift in consumers’ behavior, the latter has already played a role in reducing American addiction to oil—and that occurred well before the economic crisis erupted in 2008. The yearly total vehicles-miles traveled by the American people peaked in 2006 at 3.1 billion, and is now down to less than 2.9 billion. On a per capita basis, the mileage peak was reached in 2004 at around ten thousand miles per year and then dropped to the current 9,100 miles annually. Nor is this all. Americans are not only consuming less, but they are also consuming better—choosing smaller, more efficient vehicles or alternative modes of transportation, whereas many among the younger seem to have turned their backs to cultural patterns which regarded the car as the embodiment of emancipation. In short, it’s no longer a caddy for daddy. The change is evident both in the urban landscapes—which are now punctuated by a large number of midsize cars once abhorred by consumers—and in the numbers: according to the University of Michigan Transportation Research Institute, in 2013 the average fuel efficiency of passenger cars and light trucks sold in the United States was close to 24.8 miles per gallon, up from 20.1 in October 2007.

Although it’s highly probable that demand for oil has already peaked in the United States, as it did in Europe in the mid-1990s, and will follow a pattern of secular decline, the economic recovery will surely be accompanied by a rebound in consumption of both cars and oil—a phenomenon that is already showing up. This, in turn, could reduce American energy security. That’s why a sound approach to energy security cannot look just to supply, but also to consumption. What’s more, in terms of security it’s likely that a lower rate of U.S. crude-oil imports would have paradoxical consequences for U.S. energy security. In fact, among the most endangered foreign sources of supply would be countries traditionally considered to be “safe.” The most important of these is Canada, because it relies almost completely on the U.S. market as an export outlet for its oil.

A shrinking U.S. market implies a short- and medium-term blow to the development of the massive potential of Canadian oil sands that currently have no alternative markets. This also explains why the construction of additional pipelines to the United States—such as the highly debated Keystone XL—is key for Canada if it wants to expand its oil production. To a lesser extent, lower U.S. crude-oil imports will pose challenges for Venezuela and Mexico: along with Canada, these “safe” oil exporters to the United States will need to secure new, reliable markets and partners for their crude in the future so as not to be overly dependent (as in the past) on the shrinking U.S. oil market. This potential shift will represent an opportunity for U.S. energy competitors like China, and it will make the United States a bit more vulnerable in the future to an oil crisis because it will no longer be able to count on the Western Hemisphere’s oil as its almost-exclusive domain. Finally, even the highest degree of oil independence will not insulate the United States from the global oil market. To the contrary, any major event concerning the world’s oil will always affect the United States and could also endanger its own oil boom. The latter possibility involves a careful consideration of both global oil-production capacity and demand, as well as the price of oil.

THE CONTINUATION of the current U.S. oil boom will require, at least in the next few years, adequately high prices of oil that, in turn, would allow for escalating shale activity. Such a scenario, however, cannot be taken for granted because, almost unnoticed, the world too is facing a production boom. By December 2013, actual oil production reached almost 93.5 MBD. On top of this, there were more than 2.5 MBD that couldn’t be produced or marketed either because of different kind of disruptions (mainly due to political tensions, strikes or accidents in countries such as Libya, Egypt, Nigeria and Sudan), or because of international sanctions against Iran. What’s more, there were 3 MBD of voluntarily shut-in production—what the oil-industry jargon calls “spare capacity”—mostly concentrated in Saudi Arabia.¹ When actual production, supply disruptions and spare capacity are combined, the world seems to possess a potential oil-production capacity in excess of 99 MBD—also an all-time record.

Conversely, oil demand is growing sluggishly, as a consequence of the troubled global economic situation, the slowdown in China, India and other emerging economies, the unsolved problems of the euro zone and the impact of energy-efficiency legislation across the world. Due to all these factors, according to the International Energy Agency world oil demand was just 91.2 MBD in 2013 on average, meaning that by December of last year almost 8 MBD of oil formed stocks or simply were not produced or marketed. This imbalance is not only big, but it’s also growing, as a consequence of a bullish investment cycle in global exploration and production that started in 2003 and dramatically escalated from 2010 onward. High oil prices, the need of most companies and countries to replace their reserves, and the extensive application of new technologies to oil recovery are the major factors driving this unprecedented spending spree that in just four years has totaled almost $2.4 trillion in upstream investments.

The impact of these investments on new production capacity could be particularly acute by 2015. In particular, if the United States, Iraq, Canada, Brazil and Venezuela could deploy their full oil potential, supported by investments already under way, global oil-production capacity could reach 110 MBD by 2020. This evolution could be helped by a lower decline rate in aging oil fields, whose maturity is now contrasted by means of either massive redevelopment plans (such as in the case of Iraq), or by the application of more advanced production technology. In addition, the world’s current production leaders, Russia and Saudi Arabia, are continuing to increase their production capacity—defying the dire predictions of most pundits, who deemed those countries destined to face an irreversible decline of their oil output.

For over a decade, year after year, most experts have been predicting an immediate decline of Russian output. However, the country’s oil production has continued to rise, and it’s now at around 10.6 MBD, with the potential to grow more if the fiscal system is modified to incentivize the redevelopment of mature oil fields. As for Saudi Arabia, the Kingdom has been a preferred target of oil doomsters since the 1980s, when it was first accused of manipulating the real extent of its oil reserves. Since then, according to the “peak oil” theorists, the country should have been producing less and less. This bogus perception earned a revival in the middle of the last decade, when Matt Simmons’s book Twilight in the Desert recast doubts on the Kingdom’s effective oil potential, predicting a sudden fall of its production. By the time of Simmons’s book, however, Saudi Arabia announced a plan to expand its oil-production capacity by about 2 MBD—or the equivalent of Brazil’s production today—in just four years, and in late 2009 it reached its target.

Furthermore, last year the Kingdom brought on line another big oil field, Manifa, which in 2014 will reach its full production at nine hundred thousand barrels per day. Then, by 2017, Saudi Arabia plans to add another 550,000 barrels per day by expanding the capacity of two additional oil fields, Khurais and Shaybah. Apparently, this expansion should not add new net capacity to the country’s potential, because the Kingdom’s decision makers want to relax older fields’ production as the fresh capacity comes on. If this is the case, Saudi Arabia will just preserve its current production capacity of about 12.3 MBD (including the output from the “neutral zone” shared with Kuwait), the largest in the world. As a consequence of the upward trend in global oil production, unless a substantial rebound of oil consumption takes place across the world in the next few years, the gap between global oil supply capacity and demand will widen. This phenomenon may not affect oil prices so long as new political crises scare market operators and threaten the stability of the entire Middle East. But the basic truth remains: in the long term, a growing imbalance between supply capacity and consumption will turn into a prerequisite for a collapse of oil prices. Because the full development of shale oil in the United States requires an oil price higher than $80 per barrel in the short term, and higher than $65 per barrel in the longer term (five years), the above scenario could have a dramatic impact on the U.S. oil boom.