Is U.S. Energy Independence Finally Within Reach?
Rising gas prices have been the big energy story of the past several weeks. But many energy experts say that's a sideshow compared with the really big energy event — the huge boom in oil and natural gas production in the U.S. that could help the nation reach the elusive goal of energy independence.
Since the Arab oil embargo of 1973, energy independence has been a Holy Grail for virtually every American president from Richard Nixon to Jimmy Carter to Barack Obama.
But now, it might just be within reach.
The Shale Gale
"Energy self-sufficiency is now in sight," says energy economist Phil Verleger. He believes that within a decade, the U.S. will no longer need to import crude oil and will be a natural gas exporter.
Verleger says all of the previous presidents fighting for energy independence would be quite surprised by how this came about: It's not the result of government policy or drilling by big oil.
"This is really the classic success of American entrepreneurs," he says. "These were people who saw this coming, managed to assemble the capital and go ahead."
Small energy companies using such controversial techniques as hydraulic fracturing, along with horizontal drilling, are unlocking vast oil and natural gas deposits trapped in shale in places like Pennsylvania, North Dakota and Texas. North Dakota, for instance, now produces a half-million barrels a day of crude oil, and production is rising.
Amy Myers Jaffe, of Rice University's Baker Institute, also believes U.S. energy self-sufficiency is within reach.
"I would say we're the closest to being able to fashion a policy that would get us to energy self-sufficiency in decades," she says.
That policy would include continuing the green light on developing shale oil and gas, she says, while making sure it is done in an environmentally safe manner and continuing to require higher fuel efficiency in cars and trucks.
"This shale gale, I describe it as the energy equivalent of the Berlin Wall coming down. This is a big deal," says Robin West, chairman and CEO of PFC Energy, who has been in the energy consulting business for decades.
"We estimate that by 2020, the U.S. overall will be the largest hydrocarbon producer in the world; bigger than Russia or Saudi Arabia," he says.
While West says it's a transformative event, he doesn't say the U.S. will be energy independent. He does say, however, that the U.S. will likely end up with energy security because most of its oil imports will come from Canada, not unstable places like the Middle East.
The other game changer, West argues, is a big boost for the U.S. economy from affordable electricity produced by cheap natural gas. West says it will help revitalize U.S. manufacturing, and energy economist Verleger agrees.
"We'll have an energy advantage in almost every area," he says, "and it will be a clean energy advantage ... And it will be an advantage that the Chinese can't or no country can quickly capture."
Verleger says it will probably take a couple of decades for other countries to exploit their shale gas resources because they can't easily re-create the recipe of entrepreneurship, property rights and financing that led to the U.S. shale boom.
Other Options Available
There are skeptics, however, such as Dan Kammen, a professor in the energy and resource group at the University of California, Berkeley.
"Just simply mining our fossil fuel resources to try to get to 100 percent ... in a decade or two decades — I think really takes us in the wrong direction," Kammen says.
For instance, he says that although some natural gas is much cleaner than coal, it's not all created equal. Some gas has a dirty environmental footprint when mining techniques are factored in, and he says there's a better and cleaner way to get an economic boost.
"The real question is can we build the industry base so that we are not only using our own solar, wind and other renewable resources, but we're exporting those technologies; and that's where the big economic prize is," he says.
Furthermore, even if the U.S. produces most or all of its own crude, Kammen says, oil will remain a global commodity with a global price. Because of that, U.S. businesses and consumers will not be immune to price shocks.
West, Jaffe and Verleger don't dispute that lack of immunity, but say those price shocks will become less damaging as consumers move to higher-mileage vehicles — some that might run on cheap natural gas, or on electricity produced by that gas.