Daniel Yergin writes in today's NY Times about America's new energy reality and he hits on many key points: a) how technology brought us the shale revolution of increased domestic production of natural gas and oil, b) how that increased production has brought us thousands of "shovel-ready jobs" and a powerful "energy stimulus" to the economy, c) how cheap, abundant natural gas is sparking a U.S. manufacturing renaissance with billions of dollars of new investment capital and thousands of new jobs, and d) how increased domestic energy production is moving us towards being "energy less dependent." Here are some excerpts:
"America needs a new political discourse on energy. This would recognize the emerging reality that the United States has turned around as an energy producer and is on a major upswing. And the impact will be measured not just in energy security and the balance of payments. Energy development also turns out to be an engine for job creation and economic growth.
The oil story is being rewritten. Net petroleum imports have fallen from 60 percent of total consumption in 2005 to 42 percent today (see chart above). Part of the reason is on the demand side. The improving gasoline efficiency of cars will eventually reduce oil demand by at least a couple of million barrels per day.
The other part is the supply side — the turnaround in United States oil production, which has risen 25 percent since 2008. It could increase by 600,000 barrels per day this year. The biggest part of the increase is coming from what has become the “new thing” in energy — tight oil. That is the term for oil produced from tight rock formations with the same technology used to produce shale gas.
Tight oil is redrawing the map of North American oil. At the beginning of this year, North Dakota overtook California as the nation’s third largest oil-producing state. It didn’t stop there. It just overtook Alaska, to become No. 2 after Texas. Tight oil could reach more than four million barrels per day by 2020.
According to the old script, United States oil production was too marginal to affect world oil prices. But the gap today between demand and available supply on the world oil market is narrow. The additional oil Saudi Arabia is putting into the market will help replace Iranian exports as they are increasingly squeezed out of the market by sanctions that start later this month. But if America’s increase of 1.6 million barrels per day since 2008 had not occurred, then the world oil market would be even tighter. We would be looking at much higher prices — and voters would be even angrier.
America’s new story for energy is still unfolding. It includes the continuing development and expansion of renewables and increased energy efficiency, both of which will be essential to our future energy mix. But what is striking is this great revival in oil and gas production in the United States, with wide impacts on jobs, economic development and the competitiveness of American industry. This new reality requires a new way of thinking and talking about America’s improving energy position and how to facilitate this growth in an environmentally sound way — recognizing the considerable benefits this will bring in an era of economic uncertainty."
MP: Yergin makes a key point that without increased domestic crude oil production, oil and gas prices might have risen much higher than they did in the last few years, and might be much higher today. In other words, "Supply Matters."
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