Energy Abundance and Global Energy Leadership

Jack Gerard
Posted April 22, 2015

Today, the United States leads in petroleum products, refining and natural gas production, and we’re on track to lead in the production of crude oil; facts reinforced by last week’s EIA Annual Energy Outlook.

The report confirmed that our nation is more energy secure than ever before.  And it said in part that domestic production of natural gas is projected to grow through 2040 eventually reaching 35.45 tcf; and domestic oil production is projected to exceed 10 mbd in a few years and remain at that level through 2030.  Keeping pace with our nation’s increased development of our energy resources are the 139 operating refineries that produce more fuel than ever before and support roughly 540,000 good paying jobs and 1.9 percent of our nation’s economy. 

What’s more the benefits of this era of energy abundance extend beyond the financial. It also has helped to reduce our nation’s greenhouse gas emissions, now at twenty year lows, even as energy production is at record levels.  Here too our nation’s refineries are playing a vital role. Today, America’s world -leading refineries produce cleaner fuels which, when used in modern cars and trucks, have reduced emissions from the nation’s vehicles by 99 percent since the 1970s.

Our industry has not only set production and refining records; it has also added 600,000 jobs between 2009 and 2011, playing a critical part in our nation’s economic recovery.  All of which points to a new era of American energy abundance, security and global leadership, what I refer to as the American energy moment. Making it clear that our nation is conquering what for decades has been our most dogged economic, social and geopolitical vulnerability -- energy dependence and energy insecurity.

We got to this era of energy abundance and global energy leadership because of the entrepreneurial spirit of the private sector, the hard work of the American worker and the unique system of private property and individual rights of the American marketplace.  To continue this progress we should be mindful that these advances could easily be stalled or even reversed without forward-looking energy policies that encourage safe and responsible domestic energy development and production, that support a robust refining sector, and embrace our nation’s bright energy future.

Unfortunately, there are some in our society who do not share our view or enthusiasm for the American energy moment. It has become apparent that during this administration’s final two years in office their focus is not on our nation’s 21st century energy renaissance or on securing our long-term status as global energy leader but instead on a narrow political ideology driven by the upcoming climate change summit in Paris -- the centerpiece of the president’s effort to burnish his environmental legacy.

A recent and potentially very expensive example of why policy matters and of the administration’s bias is the EPA’s proposed ozone rule. The standard as proposed could severely limit our ability to keep pace with the nation’s expanding energy development, production, refining and transportation needs. According to a NERA study, stricter ozone regulation could reduce U.S. GDP by $270 billion per year and $3.4 trillion from 2017 to 2040 and result in 2.9 million fewer jobs or job equivalents per year on average through 2040; another reminder that EPA and other agency and departments’ first instinct is to regulate first and to ask economic questions later.

And all this as our air is getting cleaner, through the existing ozone standards that are not yet fully implemented.  The EPA ozone rule is among the best examples of last century’s command and control approach to energy policy.  This tendency to overregulate rather than collaborate with industry in general is a problem that threatens our industry’s ability to sustain and grow the 21st century North American energy renaissance.

What we need are energy policies that embrace the 21st century opportunity economy and that place good energy policies ahead of political expediency and ideology.  In that regard the needlessly drawn-out decision on the Keystone XL pipeline is a prime example.  So far we have seen six-plus years of pointless delay of the shovel ready, job creating Keystone XL pipeline, which only serves to deny as many as 42,000 American workers well-paying jobs that could produce as much as $2 billion for the nation’s economy.

More broadly, according to an IHS study, essential infrastructure improvements in just the oil and natural gas area could, over the next decade, encourage as much as $1.15 trillion in new private capital investment, support 1.15 million new jobs, and add $120 billion on average per year to our nation’s GDP.  

And looking longer-term, the continued regulatory sequestering of energy resources on land controlled by the federal government could significantly hamper our nation’s ability to remain a global energy superpower.  A Congressional Research Service study found that in federal areas, production from 2009 through 2013 was down 6 percent for crude oil and 29 percent for natural gas. And where development is possible on federal land, permitting and leasing is a slow and cumbersome process. In contrast, on private and state lands, oil production is up 61 percent and natural gas production is up 33 percent.

And even though it is clear our nation has moved beyond the decades-old legacy of energy dependency and insecurity, many vestiges of our energy past remain, including the outdated Renewable Fuel Standard.  The 21st century energy revolution has ushered in an era of unprecedented energy security thereby achieving the primary policy objective of the RFS.  Nevertheless the RFS endures, for now, not because it’s a defensible or a necessary piece of our nation’s energy policy portfolio, but rather because of parochial special interest.  The economic and energy policy arguments against the RFS are clear.  According to a study by NERA, among other negative effects the RFS could cause the cost of diesel to rise 300 percent and the cost of gasoline to rise 30 percent, decrease U.S. GDP by $770 billion and reduce worker take-home pay $580 billion.

All of these examples make clear what’s at stake when it comes to American energy policy: economic growth, job creation, domestic energy security and global energy leadership.

API’s overarching goals are to safeguard the gains we’ve made in these areas and to build upon them for future generations. To do that our nation must adopt policies that reflect America’s 21st century reality of energy abundance.   Ultimately, our nation’s energy policies should set a course that transform this American moment of energy abundance and domestic energy security into an enduring era of global energy leadership. 

This nation’s energy policies should ensure that future generations of Americans inherit an energy secure and prosperous nation and that the world witnesses for the first time how energy abundance and global energy leadership can be a positive, transformative force on the world stage.