Abundant oil and gas in Texas and the rest of the U.S. has already proven to have significant economic benefits, and not just to mineral owners in Texas and the U.S. It will continue to benefit the country as technology in this sector continues to improve. Our energy independence has the capacity to improve for the next decade or more. Increased domestic fuel production rose by 1.4 million barrels per day between 2008 and 2011, while net imports of fuel declined by 2.7 million barrels per day. More production will create jobs and help reduce the trade deficit.
However, a newly released study, “The New American Oil Boom: Implications for Energy Security,” by the Securing America’s Future Energy’s Energy Security Leadership Council (ESLC), a group comprised of top military brass and CEOs of major companies, suggests that while increased domestic oil production is important, alone it is not a long term solution for America. The report was released at the Bush Institute at Southern Methodist University in Dallas, Texas recently.
“Energy independence” for the United States is an admirable goal, but even if the U.S. were to produce enough oil to meet our demand, the domestic price is still set on the global market, meaning a potential supply disruption anywhere can impact the price of oil everywhere,” said Herb Kelleher, co-founder and chairman emeritus of Southwest Airlines and a member of the ESLC. The U.S. remains tied to unpredictable Middle East politics because of oil needs.
The study asserts that increased U.S. oil and gas production cannot shield American consumers from these volatile international oil markets that determine prices. Even countries that are net exporters of oil, such as Norway and Canada, remain subject to high and volatile oil prices. Geopolitics play a role too, and the report noted that sometimes countries that are neither large oil consumers nor oil producers can have a huge impact on the oil market, citing in particular countries with important shipping channels or infrastructure.
The fact that Iran’s government can try to put a choke-hold on our oil supply by impeding passage through the Straight of Hormuz is a serious worry. Changes in supply or demand anywhere in the world can have a huge impact on the U.S. through oil and gas prices. The study notes that the impact on the U.S. is more a function of how much oil and gas is consumed, not how much is imported. As American consumers are forced to spend more at the gas pump, that money comes at the expense of spending that consumers would have done elsewhere, affecting the economy as a whole.
The ESLC study included recommendations for the future, such as increasing vehicle fuel efficiency requirements, accelerating development of transportation fuel alternatives to fossil fuels, and also stronger support for more U.S. oil production, which remains a crucial cornerstone of our economy and an excellent opportunity to create job growth. The report also recommends switching heavy duty trucks to natural gas and increasing the efficiency and availability of electric vehicles for light duty use.
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