Failing to press America’s current energy advantage would be an enormous mistake. Demand forecasts indicate that any oil and gas glut is temporary. Further, U.S. energy policy, still based on an assumption of resource scarcity, is ill equipped to manage the new abundance.
- America’s failure to develop federally owned lands and waters and to update its energy-policy framework represents today’s low-hanging policy fruit.
- Improving America’s energy regulatory environment will amplify today’s boom by encouraging resources to be used more efficiently.
Now may seem an odd time to emphasize the importance of increasing U.S. oil and gas production. Domestic output has reached an all-time high,1“Monthly Energy Review,” Energy Information Administration (EIA), May 22, 2015, http://www.eia.gov/totalenergy/ data/monthly/index.cfm, table 3.1: oil; table 4.1: gas. prices have plummeted,2“Petroleum & Other Liquids: Spot Prices,” EIA, May 20, 2015, http://www.eia.gov/dnav/pet/pet_pri_spt_s1_w.htm (oil); “Natural Gas: Natural Gas Spot and Future Prices (NYMEX),” EIA, May 20, 2015, http://www.eia.gov/dnav/ng/ ng_pri_fut_s1_d.htm (gas). and drilling activity is slowing in response.3“Falling Rig Counts Drive Projected Near-Term Oil Production Decline in 3 Key U.S. Regions,” EIA, March 17, 2015, http://www.eia.gov/todayinenergy/detail.cfm?id=20392. Job cuts in the industry are approaching 100,000.4Dan Molinski, “Oil Layoffs Hit 100,000 and Counting,” Wall Street Journal, April 14, 2015, http://www.wsj.com/ articles/oil-layoffs-hit-100-000-and-counting-1429055740. Headlines announce that the boom has already gone bust.5Bradley Olson and Dan Murtaugh, “The Shale Boom Has Already Gone Bust—at Least for Now,” Bloomberg Business, May 3, 2015, http://www.bloomberg.com/news/articles/2015-05-03/the-shale-boom-has-already-gone-bust-at-leastfor-now Observers concerned about output typically worry that it is too high: that drilling will damage local environments; that cheap, abundant fossil fuels will frustrate progress on limiting carbon emissions; and that prospects for electric cars and wind turbines, which had enough difficulty becoming economically viable before fuel costs fell by half, will further dim.
Yet failing to press America's current energy advantage would be an enormous mistake. Demand forecasts indicate that any oil and gas glut is temporary.6See, e.g., “International Energy Outlook 2014,” EIA, September 9, 2014, http://www.eia.gov/forecasts/ieo, table A4; “BP Energy Outlook 2035,” British Petroleum, January 2014, http://www.bp.com/content/dam/bp/pdf/Energyeconomics/Energy-Outlook/Energy_Outlook_2035_booklet.pdf. Further, U.S. energy policy, still based on an assumption of resource scarcity, is ill equipped to manage the new abundance. Indeed, America's private sector has driven an oil and gas revolution in the face of, at best, ambivalent federal policy. This paper suggests 11 reforms to help craft a smarter U.S. energy policy, one that will amplify the current boom and extend it far into the future:
- Amplify the Boom (Reforms 1-5). Enact regulatory reforms to increase the efficiency and effectiveness of U.S. energy markets.
- Extend the Boom (Reforms 6-11). Open federal land and waters to energy development to replicate the extraordinary growth of tight oil.