US oil production has already increased more than 1 million barrels per day (BPD) since 2008, and it will increase further in the coming 12 months. By 2013 the US may produce at a rate of 7 million barrels per day or about 2 million barrels per day more than was the case as recently as 2008.
Adding or subtracting 2 million BPD from a world oil market that has daily volumes in the mid-to-high-80-million-barrels zone moves world oil prices. The price for oil is set at the margin of the market, and the impact of 2 million barrels per day on the clearing price depends on how tight the market is at various times. Impacts could range from modest to substantial.
US oil production increases are dampening the global price of oil and are further magnified by the contemporaneous decrease in US oil consumption. US oil consumption peaked in 2007 and has now fallen back to 1999 levels. Last year continued the trend, with gasoline consumption dropping 2.9% or the equivalent of 260,000 barrels per day. www.eia.gov/forecasts/steo/pdf/steo_full.pdf.
While the rise of US oil production and the fall of US oil consumption are not the whole reason for the recent sharp drop in oil prices, they are a contributing factor. Yes, things that we don't control fully--the travails in Europe and Iranian nuclear tensions--drive oil prices probably even more. But we are not completely at the mercy of external forces for how much oil costs.
Another way to put it, thank especially North Dakota for producing lots more oil; folks giving fuel efficient vehicles like the Prius record sales; and booming biofuels and oil substitutes for the drop in gasoline prices.