Despite a slight contraction during the first quarter of this year, the American economy has been expanding slowly but steadily since the end of the “Great Recession.”
And America’s newfound abundance of energy — especially oil and natural gas — has played a key role.
As a result of what’s sometimes called the “shale revolution” — the extraction of oil and gas from shale and other source rocks buried up to 10,000 feet below the surface — domestic oil production has jumped 40 percent since 2010 and is nearly back to its peak in the mid-1980s. What’s more, according to the International Energy Agency, America’s incremental production over the next four years is projected to be greater than the expected increase in total global demand; and by 2018 at the latest, the U.S. will have reclaimed its crown as the planet’s number one oil producer.
Natural gas output has also climbed dramatically, up 33 percent since 2010, pushing us ahead of Russia to become the world’s number one gas producing country.
Five years ago, the oil and gas industry accounted for only 3 percent of America’s economic output. Today, it’s more than 10 percent. Employment in the oil and gas industry is up nearly 30 percent since 2008 while total U.S. employment has just returned to its pre-recession level. In those states that have embraced energy development, output and jobs have grown faster than in most other states while unemployment rates are well below the U.S. average of 6.3 percent.
Because of greater domestic production, oil imports have dropped from 50 percent of consumption to 30 percent in just five years. Lower petroleum imports, combined with higher exports of gasoline, diesel and jet fuel from America’s refineries, have had a positive impact on our trade deficit.
Growing use of natural gas for power generation, industrial boilers and heating has driven down utility costs for millions of households and thousands of businesses while at the same time reducing greenhouse gas emissions to a 20-year low. To sustain this trend, new nuclear plants are being constructed in Georgia and South Carolina using an AP1000 reactor design, a technologically advanced system that will add stability to the power grid while producing no greenhouse gases.
Abundant and relatively inexpensive energy supplies are also helping to revive America’s manufacturing sector and attract foreign investment. As evidence, since 2010 the 15 states with the lowest electricity prices have all posted gains in industrial employment.
Importantly, America’s evolution as an energy colossus offers the promise of greater international political clout if we pursue sensible policies. Federal authorities could expedite the construction of export terminals for liquefied natural gas . By exporting LNG from the U.S. to Europe and Asia we can help break Russia’s hold on those markets.
Similarly, Congress could remove the current prohibition on crude oil exports, an action that would quickly produce 90,000 new jobs according to a recent analysis by the American Petroleum Institute.
A strong foreign policy requires a strong economy, and energy is America’s trump card. We’re number one in natural gas, number one in nuclear power, number one in renewables, number two in coal, and we’ll soon be number one in oil. By playing this card smartly, we can boost economic growth while reclaiming some of our lost global political leverage.
Bernard L. Weinstein is associate director of the Maguire Energy Institute in the Cox School of Business at Southern Methodist University in Dallas and a fellow with the 4 Percent Growth Project of the George W. Bush Institute.
Bernard L. Weinstein is Associate Director of the Maguire Energy Institute and an Adjunct Professor of Business Economics in the Cox School of Business at Southern Methodist University in Dallas.
