The First Steps Toward US Energy Independence
“Five years ago, if I or anyone had predicted today’s production growth, people would have thought we were crazy,” says Jim Burkhard, head of oil markets research at IHS CERA, an energy consulting firm.
Whether you are for energy independence, against it, or indifferent, there is little doubt that the United States is waist-deep in an energy production boom. Increases in domestic oil and natural gas production have been unprecedented in 2012 when compared to recent years; oil production shot up over 7% for the first time in over 50 years, while natural gas is expected to climb at least 4%, with demand increasing by 4.7% as well.
It appears as though that trend will continue for the foreseeable future. In fact, it’s projected that by 2020, the US could soon overcome Saudi Arabia as the world’s leading oil producer by averaging 13-15 million barrels a day.
What’s very compelling to consider is exactly what this will mean for the United States. There are conflicting reports about the effects of increased production; specifically as to how ramped up production will affect foreign relations with oil-rich Middle Eastern countries and also how gas prices at your local pump will be influenced.
In regards to foreign relations with the Middle East, there is a firm belief that being more energy independent will allow us to sever ties with countries like Saudi Arabia, opening the door for other countries, such as Canada, to import a reduced amount of oil across the border. Conversely, others believe that energy independence plays little to no role in our relationships with foreign countries and that there’s little sense in fixing something that isn’t broken. Whichever way you choose to see the issue, the fact is that US imports of foreign oil have plummeted from 60% in the early 1980s to just over 40% this year. Simply put, any time a country can rely less on a source of any good or service that is located across the planet is a positive based on transportation costs alone.
But do not trick yourself into believing that the ability to generate more of our own oil supply will result in the prices to go down, as this NPR report indicates. Despite the popular opinion that gas prices would expect to tumble, oil is a globally-priced item such as other commodities like corn or wheat. And since there is still a very strong demand for oil in China, India, and other developing countries, market experts expect little fluctuation with gas prices.
If there’s a single definitive trend that emerges from energy independence, it’s job growth. While the national average for unemployment continues to teeter around 8 percent, drill-happy states like North Dakota, Oklahoma, Texas, and Wyoming have dipped well below that figure. Not only do drilling companies benefit from new fracking wells, but also all of the service providers needed to keep them happy like equipment manufacturers, homebuilders, local retailers, and hotels. So while maybe the everyday citizen may have to continue paying through the nose to fill their tank, at least energy independence will allow them to have a job to pay for it.
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