AMERICA needs a new political discourse on energy. This would recognize the emerging reality that the United States has turned around as an energy producer and is on a major upswing. And the impact will be measured not just in energy security and the balance of payments. Energy development also turns out to be an engine for job creation and economic growth — something that would hardly have been considered the last time we were electing a president.
In 2008, the rise in oil prices was accompanied — and partly fueled — by a belief that an era of permanent scarcity was at hand. This mentality had deep roots extending back to the 1970s, when the United States went from being a minor importer of oil to a major importer. In the 2008 rendition, falling oil output was considered simply inevitable. The only questions were at what rate petroleum imports would rise and whether that rate would be slowed.
The outlook was much the same for natural gas. Production would inevitably decline, and the country was on the way to spending $100 billion a year to import liquefied natural gas from West Africa, the Middle East, even Australia and Russia. The energy burden on our trade deficit would only increase, adding to our economic distress.
But that is not at all how things are turning out. Technology made the difference. The natural gas market has been transformed by the rapid expansion of shale gas production. A dozen years ago, shale gas amounted to only about 2 percent of United States production. Today, it is 37 percent and rising. Natural gas is in such ample supply that its price has tanked. This unanticipated abundance has ignited a new political argument about liquefied natural gas — not about how much the United States will import but rather how much it should export.
The oil story is also being rewritten. Net petroleum imports have fallen from 60 percent of total consumption in 2005 to 42 percent today. Part of the reason is on the demand side. The improving gasoline efficiency of cars will eventually reduce oil demand by at least a couple of million barrels per day.
The other part is the supply side — the turnaround in United States oil production, which has risen 25 percent since 2008. It could increase by 600,000 barrels per day this year. The biggest part of the increase is coming from what has become the “new thing” in energy — tight oil. That is the term for oil produced from tight rock formations with the same technology used to produce shale gas.Read the rest of the article here.
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