TUSCALOOSA, Al. — Oil and gas resources in the United States are growing. Surprised? Many people are, because we usually think of oil and gas as fixed pools gradually being depleted. But the combination of new technology and higher prices are making reserves available that were previously unknown or uneconomic.
Unfortunately, many such resources are controlled by the federal government. The Obama Administration’s hostility to petroleum and natural gas production in the United States is preventing their development. It’s time to rethink the policies that hinder domestic energy production.
Any rational discussion of U.S. energy policy must begin by recognizing that our economy depends on oil and natural gas and will do so for the foreseeable future, regardless of how much money we pour into subsidies for alternatives.
Petroleum provides 37 percent of our energy, and 95 percent of the energy used in transportation. Natural gas provides 23.8 percent of our energy, including a third of the energy used for residential, commercial, and industrial uses. Coal produces another 23 percent of our energy.
Renewable energy — including the large hydro power plants hated by environmentalists — provides just 7.3 percent of our energy. We have poured billions into subsidies for ethanol, wind, and solar energy yet these technologies remain uneconomical and provide a trivial amount of our energy needs..
The trucks we see on the highway are part of a vast logistical network that makes American factories and retailers efficient and enables us to have everything from books to groceries delivered to our door.
Our valuable infrastructure of roads, gas stations, pipelines, furnaces, industrial equipment, power plants, and more in place today mean that changing to other forms of energy – even if they were available at competitive prices —will be a slow, expensive process that will take decades.
There are no magic technologies to completely end our dependence on energy sources from outside North America. But there are technologies available today that can be deployed on existing, known energy reserves and which will lead to additional improvements in technology and discovery of additional reserves.
The federal government estimates that there are 86 billion barrels of oil on the outer continental shelf. We consume around 7.6 billion barrels of oil per year. The government also estimates there are 420 trillion cubic feet of natural gas offshore — enough for about 14 years domestic use at current rates.
Onshore, shale oil and gas recoveries have grown rapidly. In North Dakota alone, oil production doubled between 2008 and 2010. Some industry experts estimate we could increase production by 2.5 million barrels per day just from shale oil and are resources from the Gulf of Mexico.
That’s not enough to end our dependence on foreign sources but it is enough to smooth price swings from political instability in the Middle East and restrain price increases. Both effects would boost the economy and, increase employment. Because much of these resources are on federal property, increasing energy production would boost government revenues as well.
Increasing our domestic energy production won’t happen overnight. It takes time to identify reserves, drill wells, and bring production on line.
We don’t know how much our reserves are, in part because we’ve put huge areas off-limits to exploration. But waiting isn’t going to solve our problems.
We need to start exploring and developing our domestic oil and gas resources now, so the next time there is a crisis in a major oil producer, we don’t find ourselves in the same position we are today.
Andrew P. Morriss is the H. Ross & Helen Workman Professor of Law and Business Professor at the University of Illinois. Readers may write him at the Institute for Government and Public Affairs, 504 E. Pennsylvania Ave., Champaign, IL, 61820, or e-mail him morriss at law.uiuc.edu
