Posted February 26, 2015
The president’s Council of Economic Advisers (CEA) understands the significance of the U.S. energy revolution quite well – reflected in the energy chapter of its recent 2015 Economic Report of the President.
The chapter should be widely read by policymakers, from the president and Congress on down, because it notes the role of surging domestic oil and natural gas production in the ongoing energy revolution. From there it’s possible to identify needed policies for the future.
Over the past ten years, the U.S. economy has undergone a revolution in the production and consumption of energy. Increasing production of oil, natural gas, and renewable energy has contributed broadly to employment and gross domestic product (GDP) growth during the recovery from the Great Recession. … Declining net oil imports have helped reduce the U.S. trade deficit and improve energy security. … The combined effect of increased production of natural gas, oil, and liquid biofuels has positioned the United States as the leading petroleum, natural gas, and biofuels producer in the world.
Let’s look at some of the report’s charts, which sketch the United States’ emergence as a global energy superpower.
It’s mainly due to surging oil production …
… which let the U.S. lead the world in oil production growth from 2008 to 2013 …
Now, the U.S. is leading the world in energy output:
Which is improving the United States’ global trading position:
As the U.S. lowers its imports of oil, it becomes more energy secure:
The report notes the economic benefits of the energy revolution – GDP growth, job creation in the oil and natural gas industry, as well as other parts of the economy, and an improved trading posture:
The U.S. energy revolution has contributed to economic growth, both in terms of net economic output as measured by GDP and overall employment. It has also contributed to a declining trade deficit as the Nation has recovered from the Great Recession. CEA estimates that the oil and natural gas sectors alone contributed more than 0.2 percentage point to real GDP growth between 2012 and 2014 … The oil and gas employment increase in Figure 6-11 understates the full short-run effect of oil and gas development on U.S. employment for two reasons. First, jobs have also been created in companies that provide goods and services to the oil and gas industries, including manufacturing, transportation, and leisure and hospitality. Second, workers in all of these industries create additional jobs when they spend their incomes, as do State and local governments that spend additional tax revenue. As a result, new oil and gas regions have seen employment growth in schools, retail, health care, and other sectors.
The report notes the impact of growing domestic energy production on U.S. security in the world:
The results of this analysis suggest that a lower share of net oil imports in GDP enhances the resilience of the economy to oil price shocks. Specifically, the same oil price increase reduces GDP much less in 2015 than it did in 2006, and will reduce GDP even less at the lower import level that EIA projects for 2017. This analysis suggests that the unconventional oil boom and lower oil demand have significantly improved U.S. energy security.
Other key points:
- Natural gas production and affordable prices is presenting an export opportunity for U.S. producers. If a global market for liquefied natural gas (LNG) develops, “domestic natural gas prices are likely to remain well below prices in the rest of the world for an extended period of time.”
- As U.S. natural gas enters the global market, it will increase supply and push down global prices.
- Low natural gas prices are broadly benefiting U.S. households in the form of lower utility bills that is creating more disposable income.
- Lower global crude oil prices have translated into lower prices for products including gasoline, diesel, heating oil, propane and jet fuel.
- Environmentally, nearly one-half of the United States’ carbon dioxide emissions reductions from 2005 through 2013 come from fuel switching – to natural gas, wind and solar – for generating electricity.
The report’s energy chapter outlines the scope and impact of America’s energy revolution. To keep it going, we should acknowledge the revolution’s main driver: domestic oil and natural gas production gains – by increasing access to oil and gas reserves, especially in federal areas (onshore and offshore) and by taking a sensible approach to regulation to ensure safe development without needlessly regulating for regulation’s sake.
We need what President Obama mentions regularly – a genuine all-of-the-above energy approach. It’s an approach that recognizes the need for more oil and natural gas development – and also the development and deployment of other energy sources: solar, nuclear, hydro, geothermal, wind, coal and biomass, as well as others that may contribute to America’s energy mix.
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.