An energy renaissance
Since the traumatizing oil shocks of the 1970s, Americans have gotten used to the idea that the United States would produce less and less of the energy it demands, sending untold billions abroad in service to its fossil-fuel addiction. That’s partly why the headlines that the country’s recent energy boom have generated seem so amazing. The latest is from the International Energy Agency: Its analysts predict that increased production of natural gas and oil in the United States will help slash energy imports, cut deeply into the trade deficit and result in a country that is, on net, nearly energy self-sufficient by 2035.
But the IEA report also makes clear that the United States can’t declare independence from world markets or excuse itself from seriously rethinking how it generates and uses energy.
Even by 2035, the United States will not be immune from the fluctuations of world oil prices, nor should the country try to close itself off from energy imports or shut down fuel exports. It will need both. Despite an improving net energy trade balance, the IEA reckons that the country will still require an astonishing amount of imported oil in 2035 — 3.4 million barrels per day. The improved trade balance, meanwhile, is premised on the notion that lawmakers won’t shut down exports of natural gas and other fuels in a shortsighted effort to contain domestic energy prices.
Fully participating in global markets is the best way to reward domestic producers, encourage investment in economical domestic production and keep consumer costs down. For example, it is currently more profitable for Gulf of Mexico refineries to export some of the gasoline they produce to Latin America than to send it to the northeastern United States. Those profits allow U.S. refineries to continue operating at higher production levels, which helps business and consumers. The U.S. Energy Information Administration determined such exports do not significantly raise fuel prices for Americans in the Northeast, since importing gasoline from Europe to New York Harbor is inexpensive relative to moving gasoline east from Texas.
Even with enhanced fossil-fuel production and robust participation in international markets the United States will need to use less, for economic and environmental reasons. The IEA report finds that more domestic oil drilling will push down the country’s imports through 2020. But after 2020, cutting oil demand with policies such as President Obama’s vehicle efficiency standards will make the biggest dent in imports. Ultimately, the best way to insulate Americans from price swings in international fossil-fuel markets is to use less fossil fuel.
Efficiency and conservation will also help the environment. The IEA proposes an even more aggressive approach, arguing that if world governments merely adopted economically viable, off-the-shelf techniques to cut energy use, energy-related carbon dioxide emissions would peak in 2020 and decline from there.
The United States should welcome its newfound energy wealth but use it more carefully.