American Exploration & Production Council | November 22nd, 2022
Before the American Shale Revolution, our country faced high and unstable energy prices and increasing emissions. We were largely reliant on foreign countries to meet our energy needs – meaning that we were beholden to the interests of nations who did not always share our geopolitical interests.
Up to the early 1950s, the United States produced most of the energy it consumed. Starting in the mid-1950s, the United States began to import greater amounts of energy, particularly crude oil and petroleum products to fill the gap between energy use and production. Total energy imports into the US was generally increasing each year.
We were also concerned about “peak oil” in 1970, and the world was worried that we were running low on this critical fuel needed for daily life.
The effect of the US embargo of oil from Iran can be seen in the early 1980’s with the price of gasoline peaking in 1982. American production was on the decline, and many thought it would never come back. As the US was largely reliant on oil from the Middle East, we were held hostage to OPEC.
This reliance was affecting our trade balance and providing financial support to oil exporting regimes which often countered US interests. Wars were fought over access to oil in the Middle East. From 2002 to 2008 the price of gasoline rose substantially.
But, 2002 was the beginning of the Shale Revolution. Because of entrepreneurship, free markets, contract law, property rights, and innovation, something uniquely American happened– the American energy revolution. This changed the global energy landscape and reduced our reliance on foreign regimes for oil. Total energy imports subsequently declined in most years as increases in US energy production offset the need for imports. Link.
Over a decade ago, the partnership of a new technology, horizontal drilling, and an established technology, hydraulic fracturing, led to the ability to unlock vast amounts of crude oil from Texas, New Mexico, Colorado, and North Dakota. And abundant supplies of clean natural gas from Ohio, Oklahoma, Pennsylvania, and West Virginia.
Our industry led the way in pulling America out of the financial crisis of 2008 and 2009 by adding significant growth to our nation’s GDP. During the Shale Revolution, the price of most household goods increased significantly, yet energy costs went down due to domestically produced oil and natural gas unlocked through fracking. According to the Dallas Fed, oil prices in 2018 would have been roughly 36 percent higher and 25-50 percent more volatile had the Shale Revolution not occurred. The same can be seen with natural gas. In 2005, the price of natural gas was just under $12 per btu. By 2017, it was under $4 (link, figure 4) due to the Shale Revolution.
American energy became the feedstock for historic economic growth, brought manufacturing jobs back home, and provided lower energy prices for Americans – as well as the world.
This historic change also contributed to our climate leadership. From 1990 through the beginning of the shale revolution, emissions steadily increased. In its 2006 Annual Energy Outlook, the Energy Information Administration projected a 15 percent increase in carbon dioxide emissions from 2005 to 2017 (Figure 9). But, actual carbon emissions significantly decreased.
The shift to generating more electricity from natural gas and renewable sources reduced energy-related carbon dioxide emissions at the national level at levels not predicted prior to these innovations. According to the US EPA: “The United States is a world leader in protecting the environment and reducing greenhouse gas emissions. From 2005 to 2018, total US energy-related CO2 emissions fell by 12 percent. In contrast, global energy-related emissions increased nearly 24 percent from 2005 to 2018.”
US oil production and US natural gas production increased significantly – all while the United States became the world leader in emissions reductions. According to the US Energy Information Association (EIA), the US electric power sector reduced emissions by 32 percent from 2005 – 2019, due to the shift away from coal and toward natural gas and renewables.
AXPC member companies are the authors of this great American Shale Revolution, helping to transform our nation’s energy landscape. Because of shale, we can be energy secure, while meeting the dual challenge of providing affordable and reliable energy and reducing emissions.
The United Sates became so successful in producing oil and natural gas that we started exporting our energy to our allies around the world, providing them with affordable and reliable energy – while also supporting increased jobs and economic growth here at home.
When Congress lifted the crude oil export ban in 2015, it put downward pressure on prices at the pump for Americans by increasing the availability of crude in the global market. Economic analyses show that open markets increased oil and natural gas development in America, which saved Americans $92 billion, added $161 billion to US GDP, and added about 50,000 American jobs.
But we didn’t stop there. As the world’s need for energy increased, so did our industry’s commitment to finding real solutions. We refocused and rebuilt “import terminals” to become export terminals for another new innovative product: liquefied natural gas (LNG).
America began to export LNG in large volumes in 2016. Now, five years later, the United States has six large LNG export terminals (in Louisiana, Texas, Maryland, and Georgia), and is now one of the world’s three largest LNG exporters, along with Australia and Qatar.
In addition to meeting growing domestic at home for natural gas, we export this key resource to growing economies around the world to help lift millions out of poverty by providing affordable, reliable energy with significantly lower-emissions than higher-emitting fuels, like coal.
Energy supply is a key asset in the global balance of power. America’s energy production is a source of strategic strength that supports both our climate negotiations and our foreign policy goals.
Our industry has provided real answers to some of the world’s greatest challenges. But, we face tremendous obstacles: permitting challenges, infrastructure constraints, and the political targeting and vilification of our industry. We are here to help solve the world’s biggest challenges, but we need policies that support American-made energy.
We are not partisans, we are Americans. We are proud of the industry that we work in, and we have tremendous capacity to respond to crises the world faces. If we want the free world to remain free, and a lower carbon future for future generations, American energy needs to be embraced.
That’s why AXPC is committed to working with leaders in Washington on a serious energy strategy that embraces all of America’s energy resources, including oil and natural gas.