Energy: The Missed Opportunity for Economic Growth

During the first quarter of 2015, U.S. GDP growth was 0.2%.  That’s two tenths of one percent, not two percent.  For March, the jobs number was 126,000, less than half of the 12-month rolling average – and most of those jobs were low-wage or part-time service positions.  Anyone who says good times are here again needs to spend some time in the real economy, not just in the well-funded halls of Washington.

A major reason for the economic stagnation is the decline in oil and gas drilling, and in the energy sector more broadly, including coal.  Global price declines are partly to blame, but the underlying problem is the Obama administration’s hostility toward fossil fuels.

If Obama had embraced fossil fuels from the start of his administration, today’s economic numbers would look a lot better.  Instead, he has imposed unnecessary environmental restrictions, blocked Gulf Coast drilling, vetoed the Keystone XL pipeline, and failed to approve export licenses for oil and natural gas.

By promoting fossil fuels, including use of natural gas for power and transportation and increasing export of oil and coal, Obama would have “created or saved,” as he likes to say, millions of good jobs (with increased oil export alone creating between 394,000 and 859,00 new jobs).  As long as the administration remains hostile toward the energy sector, the economy will continue in the new normal of subpar growth.

America is missing an enormous opportunity, as the latest edition of ExxonMobil’s “Outlook for Energy” proves.  This highly respected report shows global energy demand growing from the current level of 500 quadrillion BTUs to more than 700 quads by 2040.  By that time, wind and solar will still constitute less than 2% of global supplies.  Oil and natural gas, growing at 0.8% and 1.6% respectively, will contribute by far the largest share of supplies.

Despite the president’s anti-fossil fuel policies, America’s oil and gas industry has done a superb job of increasing domestic production – so much so that global prices have declined by more than half, benefiting American consumers.  Not many drivers want to see the $10-a-gallon gas that Obama’s energy secretary advocated in 2011.  They’d rather have gas for $2.50 a gallon, and that is what America’s oil and gas industry has delivered.

Since 2009, the U.S. economy has grown by a dismal 1.6% per year.  That is one third of what would be expected in a period of economic recovery, but even so, nearly all of it has come from  the energy sector.  Now that exploration has been temporarily curtailed due to falling global prices, it’s become painfully clear just how much the energy sector has been contributing.  Domestic rig counts have dropped from a recent high of 1,920 to 954, with more to come.  Jobs in the energy sector have fallen proportionately.  And GDP growth is near zero.

The energy sector is in crisis, and Obama needs to step in – or, more accurately, step back – by cutting regulations, bans, and needless environmental delays that make U.S. drilling less competitive.  The likelihood of this happening is zero, so we can expect more subpar jobs and GDP numbers from now until he leaves office.  For the next president, however, a great opportunity exists – an opportunity so great that it will determine whether America is to continue as the world’s leading economy and superpower, or whether it will become a second-rate nation, as many on the left wish it to be.

The opportunity is for the U.S. to become not just energy independent, as it is now close to becoming, but the world’s leading exporter of fossil fuels.  It seems that the Obama administration has done everything possible to prevent this from happening.  As a result, there are millions of Americans working at minimum-wage jobs or collecting welfare who could have a shot at six-figure incomes.  The nation as a whole could be growing at 4% instead of the current 0.2%.  The effects of this growth would be dramatic as a new spirit of optimism spreads across the land.

Instead, America today seems a nation hunkered down, fearful of attack, divided and resentful.  What’s missing is real prosperity, something Obama has done less to deliver than any president in memory.       

As the “Outlook for Energy” points out, 100% of increased demand over the next 25 years will take place in non-OECD countries.  With its advanced technology and reserves, the U.S. is in a good position to supply that demand.  By the end of 2015, U.S. natural gas exports will begin shipment from Gulf Coast facilities, but Obama has restricted the amount to a fraction of what it could be.  By approving expanded oil exports as well, the administration could encourage increased domestic production, resulting in GDP and jobs growth.

The opportunity is far greater than some realize.  According to the U.S. Geological Survey, global recoverable oil reserves have more than quadrupled over the past 30 years due to advances in technology (cited by the “Outlook”).  This dramatic increase in recoverable reserves is confirmed by a report from the U.S. Energy Information Administration stating that, just from 2011 to 2013, U.S. technically recoverable resources from tight formations (shale) have increased from 32 to 345 billion barrels.  Enough oil is now recoverable, with existing technologies, to supply the global economy for 150 years.  Natural gas reserves can meet demand for more than 200 years.  And these assessments do not begin to cover those offshore and foreign sites that have never been surveyed with modern imaging technology, including offshore U.S.

The opportunity that exists for U.S. energy producers is vast and long-term.  American oil and gas companies lead the world in technology and expertise.  The energy industry is in a position to continue contributing to U.S. economic growth for centuries to come, but only if its efforts are not impeded by government.  Allowing another country, such as China, to take the lead in the energy sector would amount to economic suicide.  Unfortunately, economic suicide seems to be what the Obama administration does best.

Jeffrey Folks is the author of many books and articles on American culture.