Has the lack of a workable energy policy been a blessing? Surprisingly, yes.
Take the shale revolution. Its success has put the brakes on Russia’s Vladimir Putin, weakened OPEC and propelled the United States into a leadership position in global oil and natural gas production.
It happened not as a result of government mandates, regulatory pressure or taxpayer subsidies. Rather, it came about primarily due to innovation, entrepreneurial problem-solving and the marketplace, with some early government assistance in developing the technology for fracking and horizontal drilling.
Lo and behold, the shale revolution is not only driving economic growth and putting millions of Americans to work but also providing elegant and efficient solutions to problems like foreign-oil dependence that policymakers couldn’t solve.
Since the oil crises of the 1970s, one U.S. president after another has lamented our energy insecurity and pledged to take action. And yet, our dependence on foreign fuel steadily grew and hit a peak in 2005 of 60.3% of U.S. petroleum products consumed that year. But the shale revolution changed all that. Surging oil production from the Bakken in North Dakota, the Eagle Ford and Permian Basin in Texas and other shale plays has reduced the nation’s dependence on foreign oil to below 28% this year — the lowest in almost 30 years.
We are soon expected to surpass Saudi Arabia as the world’s largest crude oil producer. Not only has U.S. output — up nearly four million barrels per day just since 2010 — helped hold down global oil prices amid large supply disruptions from countries like Libya, Iraq and Iran, but it’s also led to a price cut of 28% since June. That fall — from $108 per barrel to around $78 today — will be a huge economic stimulus.
If oil and gas prices stay at their new low, American consumers will save about $100 billion on fuel over the next year, or $800 per U.S. household. As Harold Hamm commented recently in IBD, “Let’s see Washington deliver anything like that soon.”
Clearly, no industry has done more to get America back on its feet in the wake of the Great Recession than the oil and gas industry. Shale-energy production, almost nonexistent a decade ago, now supports 2 million jobs and could support 3.3 million by 2020 according to a study by IHS Global Insight.
And the benefits aren’t only economic. Abundant, low-cost natural gas is reshaping our electricity mix and driving a significant reduction in carbon emissions. As recently as 2005, coal generated 60% of the nation’s electricity. But today, that figure has fallen to just over 40% as utilities turn to gas. Because gas generates just half of coal’s carbon emissions when burned to generate electricity, emissions fell in 2012 to their lowest since 1994, before edging higher last year.
Where bureaucracy has failed, clumsy government action has often done more harm than good, market solutions and “Made in the USA” technologies like hydraulic fracturing that gave birth to the shale revolution have succeeded with flying colors.
Obama Hasn’t Learned
Yet, the Obama administration continues to promote renewable energy sources while largely ignoring fossil fuels and nuclear power. What’s gained by turning EPA into a carbon attack dog? What’s gained by pushing for billions of dollars in additional taxes on oil companies? It’s as if the administration can’t bear to acknowledge the lessons of the shale revolution, arguably one the most remarkable energy success stories in U.S. history.
We need less interference in the energy marketplace, not more.