Last week a group of energy experts testified before a hearing of the House Energy and Power Subcommittee on North American energy security. They discussed with the Subcommittee the future of energy and our outlook for the next decade. The focus of the hearing was the release earlier this year of a number of independent reports that show that by the end of this decade North America can produce enough oil and natural gas to meet America’s energy demands (America already is self-sufficient in coal production).
As IER demonstrated in the North American Energy Inventory, the United States is an energy rich country and we have a bright energy future. Our energy issues are not caused by a lack of energy resources, but because of poor federal policies.
IER’s report is not the only report to demonstrate our bright out energy future is. One report addressed in the hearing, authored by Citigroup, specifies precisely how this “Energy Renaissance” is to be achieved.
The Citigroup report points to five sources of supply which could help release the burden of overseas energy imports. The five are:
- oil sands or bitumen deposits of Alberta
- deepwater fields of the Gulf of Mexico
- natural gas liquids derived from natural gas deposits in the Bakken and Marcellus formations
- biofuels and
- oil from shale rock and tight formations.
It is thanks to new technologies and advances in horizontal drilling and hydraulic fracturing that we are able to access natural gas and oil deposits which were hitherto not recoverable. Geologist knew that shale formation contained oil and gas resources, but for decades it was impossible to extract the resources at a reasonable price. Because we could to efficient extract these shale resources, official proven oil reserve figures did not include them, drastically affecting the national viewpoint on our energy security.
For decades, declining oil production in the U.S. had led to a perception of resource scarcity, which was in turn used by groups and politicians opposed to more domestic energy production to justify market interventions by the government and reductions in choice for consumers. However, this is beginning to change because this technology is now tried and proven, and is being used every day in North America to extract our resources, power our economy, and create jobs.
The federal government needs to acknowledge this economic reality and energy reality and move away from the energy scarcity paradigm they have so conveniently used to justify the growth of government power. The prospect of substantial economic growth here in United States is part of the promise of reduced energy costs to power our economy. Because we have ever increasing access to our natural resources, supplies can increase and costs can be considerably reduced, to benefit the average American.
Another important outcome of increase oil and natural gas production is that hydrocarbons as feedstocks for many of the products that make modern life as we know it possible—from pharmaceuticals to plastics. Energy products do not just serve our energy needs, but also form the basis of a modern industrial society. The easier it is to access and the less expensive energy is, the more we can enjoy these products while increasing our wealth and freeing capital for other expenditures.
Dr. Daniel P. Ahn of Citigroup calls what is happening in the burgeoning energy sector a “revolution”, in which he sees the creation of millions of jobs as just some of the effects of the energy renaissance that will be will be felt across all sectors of the American economy. However, he sees two inter-connected risks. The first is political. As Washington wrangles over whether to continue its anti-energy policies, this causes the second risk identified by Dr. Ahn—a logistical supply problem, preventing fuel and feedstocks from getting to manufacturers and consumers. This lack of supply in turn increases prices. Unfortunately the keys to unlocking these two barriers rest with the federal government and the federal government has a poor tracking record of allowing increased oil, gas, and coal production.
For many years, federal government policies have created the energy problems people believed were the fault of resource scarcity. As the energy renaissance in the United States and North America continues to prove that resource scarcity is not a problem, the threat from Washington continues.
(IER Associate Joseph O’Connor contributed to this post)