The President and Petroleum

Mark Green
Posted July 6, 2016

Good to hear President Obama extolling some of the benefits of the U.S. energy revolution this week in North Carolina, starting with security and consumer benefits. Both are firmly linked to surging domestic oil production – which of course is why the United States leads the world in oil and natural gas output. The president:

“Remember when we were all concerned about our dependence on foreign oil? Well, let me tell you, we’ve cut the amount of oil we buy from other countries in half. Remember when the other team was promising they were going to get gas prices down in like 10 years? We did it. … So we have been able to shape an energy policy that’s good for families, good for your pocketbook.”

Indeed, producing more oil and gas here at home has had great impact on U.S. energy security and security overall. The United States is stronger in the world today because it is less dependent on others for imported energy. According to the U.S. Energy Information Administration (EIA), net imports stood at 4.6 million barrels of oil per day in 2015 – lower than any year since they were at 4.2 million barrels per day in 1985. EIA projects that in 2040 net crude imports will drop to about 1.5 million barrels per day.

That projection – almost unimaginable less than a decade ago – results from the energy revolution, in which private investment and private producers are accessing vast quantities of oil and natural gas from shale and other tight-rock formations, safely and responsibly, via modern hydraulic fracturing and horizontal drilling. Let’s be direct: Our energy revolution is being led by fracking. Without it we’d probably be stuck with a gap between domestic supply and consumption like one that existed in the mid-2000s, when net imports accounted for 60 percent of the liquid fuels needed to run our economy and our daily lives.

You could say the U.S. has drilled its way to greater energy security – an arc of progress that could continue with the right energy policy choices, including increased access to reserves, fair and reasonable oversight and more efficient leasing and permitting processes. We need a bold, visionary offshore energy leasing program, worthy of America’s energy superpower status, and less federal red tape encumbering onshore development.

We need an approach for building needed energy infrastructure – especially new natural gas pipeline capacity – that properly manages projects without surrendering America’s energy opportunity to a vocal minority that opposes anything that facilitates oil and gas development. The lack of sufficient pipeline infrastructure already has cost the Northeast, where they’ve paid more to heat homes and run businesses than they would have with a modern natural gas network in place.

The second thing the president mentioned is gasoline prices. Increased domestic oil production is a big reason prices at the pump were at $2.36 per gallon in June, according to EIA – the lowest June level since 2005. AAA reports that lower prices allowed each licensed U.S. driver to save an average of more than $550 in 2015 compared to 2014. Again, with a big shout-out to domestic oil production. And, though President Obama didn’t mention the energy revolution’s role in reducing overall household energy costs, we don’t mind doing so. Domestic energy has helped the average American household save almost $750 in annual energy costs since 2008, EIA says:

Back to the president’s remarks. He also talked about achieving climate goals:

“… America ultimately led nearly 200 other nations to an agreement to save this planet for future generations. … But the point is, we’re not done with this, so where we go from here is up to you.”

Certainly this is correct: The work on climate isn’t done. Yet, U.S. progress on reducing carbon emissions already is well underway, and it’s thanks to choices in the free marketplace rather than international accords or government initiatives. The U.S. leads the world in reducing energy-associated carbon emissions largely because of increased use of clean-burning natural gas, particularly in power generation. According to EIA, U.S. emissions last year were 12 percent below 2005 levels despite the fact the economy was 15 percent larger last year than it was in 2005:

This is a terrific but under-told story: that the United States is enjoying a period of economic expansion, increased energy development – and reduced carbon emissions. It’s a model that works and could be replicated as other nations look for ways to reduce their emissions. Kenneth Medlock of Rice University’s Center for Energy Studies earlier this year:

“When you think about other countries meeting certain goals that are related to CO2 emissions, those aspirations could largely be fulfilled by a greater U.S. presence, particularly in the natural gas domain. ... I think a lot of countries are going to start to reevaluate how they actually approach certain climate goals and what U.S.-sourced natural gas might mean. I think long-term this has the potential to be everybody’s transformative, as what we’ve already seen in the United States with regard to our own CO2 emissions.”

So, yes, we commend President Obama for helping draw public attention to the benefits of the U.S. energy renaissance. Private energy investment and entrepreneurship are making the nation stronger and more self-reliant while helping individual American households.

Energy is affording the United States great opportunities today and tomorrow. All we have to do is embrace them.