For the first time in decades, the United States is experiencing a dramatic and sustained increase in domestic oil production. In The New American Oil Boom, Securing America’s Future Energy examines the benefits inherent in this growth, as well as the threats posed by oil dependence to the nation’s long-term prosperity.
Between 2009 and 2011, the United States experienced three consecutive years of crude oil production increases for the first time since the early 1980s, as well as the largest surge in output within a three year period since the late 1960s. This marks a sharp reversal from conventional wisdom of only a few years ago, suggesting U.S. crude oil production was in a decades-long state of decline.
Occurring due to a perfect storm of prices, technology, and opportunity, this shift in domestic production is substantial, and has profound positive implications for the domestic economy. Namely, increased oil production will reduce the trade deficit, and the petroleum industry can play an important role in driving employment growth. However, these benefits are tempered by the realities of the global oil market, especially in light of continued instability in oil-producing regions, and soaring demand from China, India, and other emerging markets. Most importantly, the paper examines the myth of “energy independence,” underlining that even dramatic increases in domestic production cannot fully insulate the country from the costs of oil dependence, such as high prices and continued volatility, capital flows overseas, and the burden to the military in securing global oil supplies.
In The New American Oil Boom, SAFE addresses the following policy issues:
- Key Drivers of the Oil Boom: How are high oil prices, technology breakthroughs, and the natural gas glut coalescing to drive the production boom?
- Trends and Outlook: Which regions present the strongest opportunities for production growth, and what are the prospects onshore, in the federal Gulf of Mexico, and what are the projections for costs and quantity of imports?
- Costs of Oil Dependence: While understanding that production increases will mediate the trade deficit and drive employment growth, what are the limits to these benefits? How does the nature of the global oil market prevent the United States from achieving domestic price advantages, and why can U.S. consumers expect continued price volatility?
- Defining Energy Security: What is the difference between energy security and energy independence, and how should policymakers work to maximize energy security while keeping sight of the long term costs of oil dependence?
Furthermore, while encouraging policymakers to support increased domestic oil production, SAFE presents a number of long-term policy recommendations. To complement the benefits of the oil boom, vehicle fuel-economy standards, and a long-term transition away from petroleum based fuels in the transportation sector are essential steps the country must take towards breaking oil’s stranglehold over our economic and national security.