Posted December 10, 2014
Two U.S. energy production updates and a new Congressional Budget Office (CBO) report showing the economic impacts of America’s shale energy revolution – which is driving overall U.S. production.
First this chart from energy/economics blogger Mark J. Perry:
This is the impact of U.S. energy production on energy imports – measuring net petroleum imports as a share of products supplied. The chart shows steady increases in imports from the mid-1980s to an apex of more than 60 percent in 2005. Today, we’re looking at a percentage share that’s as low as it has been in four decades. Perry:
Through October of this year, net petroleum imports as a share of products supplied fell to 27.1%, the lowest level of dependence on foreign sources of petroleum in more than 40 years, going all the way back to 1971. For that increase in petroleum self-sufficiency to a 43-year high, we can thank the shale oil revolution in America during the last 8 years, which has transformed the US into an energy superpower and brought us from several generations of energy scarcity into a new era of energy abundance.
Then there’s this from the U.S. Energy Information Administration’s (EIA) latest short-term energy outlook, showing the rise in oil production – from an average of 7.4 million barrels per day in 2013 to 8.6 million this year. EIA projects 2015 production to average 9.3 million barrels per day.
That’s total production, including offshore and other non-shale sources, but shale development is the biggest engine in growing U.S. output. EIA also notes the impact on net imports:
The growth in domestic production has contributed to a significant decline in petroleum imports. The share of total U.S. liquid fuels consumption met by net imports fell from 60% in 2005 to an average of 33% in 2013. EIA expects the net import share to decline to 21% in 2015, which would be the lowest level since 1969.
That’s America’s energy revolution at work – increasing supply to reduce U.S. net imports, increasing U.S. energy security and exerting positive impact on global crude oil markets, the result of which every American consumer is seeing at the pump today.
The revolution also is at work in broader economic terms, as the new analysis from CBO shows, boosting GDP and revenues to the federal government. Key points:
- Development of shale resources will lead GDP to be 0.7 percent higher in 2020 and 0.9 percent higher in 2040 than it would have been otherwise.
- The market value of shale gas produced in 2013 was about $35 billion, while the market value of tight oil (including natural gas liquids) produced by hydraulic fracturing, was about $160 billion. Together, the $195 billion total was about 1.2 percent of GDP.
- Federal tax revenues will be about three-quarters of a percent (or about $35 billion) higher in 2020 and about 1 percent higher in 2040 than they would have been without shale development.
Total domestic production of oil and natural gas will continue to be higher than it would have been without shale development, reducing the prices of those energy supplies. The lower prices, in turn, will increase domestic consumption of oil and gas, domestic consumption of energy overall, and net exports of gas, while decreasing the production of oil and gas from conventional resources, net imports of oil, and the use of competing fuels.
Shale development also boosts GDP in other ways. The increase in GDP just described represents increased income, which allows people and firms to save and invest more in productive capital, and the higher productivity just described increases wages, raising the amount of labor available. Both the increased capital and the increased labor raise GDP. In addition, in the near term, shale development causes labor and capital to be used that would otherwise be idle, again raising GDP.
CBO says exporting liquefied natural gas would “probably increase domestic production but have little effect on prices.” It says consumers would helped by lifting the ban on U.S. crude oil exports:
Perhaps counterintuitively, U.S. consumers of gasoline, diesel fuel, and other oil products would probably benefit, along with domestic oil producers, if the ban was repealed … Consumers would benefit from small reductions – 5 to 10 cents per gallon, in the baseline scenario of a recent study – in the domestic prices of oil products, because those prices depend primarily on the world price of crude oil, which would decline slightly once lower-priced U.S. crudes were available in the international market.
Again, the fruits of our home-grown energy revolution: more energy, job creation, economic growth and greater security in the world. Keys to keeping it going include increased access to domestic energy reserves, onshore and offshore; sensible regulation that fosters predictability and timeliness for producers; and political leadership that pursues policies and approaches that result in growing domestic production of the energy that’s critical to our economy and will carry it forward in the future.
ABOUT THE AUTHOR
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.