In less than a decade, the U.S. has gone from being reliant on others to being a key worldwide player in the energy game. The global energy market is realigning with the U.S., poised to remain a dominant global player. The energy policy decisions made will determine whether America remains a positive and stabilizing force in the world’s energy market and whether consumers can continue to count on reliable, affordable and abundant domestically produced energy for generations.
“The state of American energy is strong even during this time of realignment,” said Jack Gerard, president and CEO of the American Petroleum Institute, while addressing the 2016 State of American Energy report. “The United States is more energy self-sufficient and has transitioned from an era of energy scarcity and dependence into a global energy leader.
“This year’s report captures America’s current energy reality and potential through the lens of seven U.S. regions: East, Southeast, Gulf Coast, Pacific, Arctic, Mountain West and Central. The report emphasizes the national scope of the oil and natural gas industry and identifies the common challenges we face and the important leadership role played by the states in the transition of our nation away from decades of energy scarcity and uncertainty and toward an era of energy abundance and security.”
Surplus lowers energy costs
According to Gerard, the 21st-century American energy renaissance, which has created an unprecedented surplus of energy, has significantly lowered energy costs for American consumers and delivered a sizable lift to the U.S. economy.
“For example, the Energy Information Administration (EIA) estimates that the American consumer saved, on average, $700 in 2015 on transportation fuel costs as a result of abundant energy,” Gerard said. “And IHS estimated that average U.S. household income was $1,200 higher in 2012, given lower home energy costs brought about by unconventional development. IHS estimated that figure could reach $3,500 a year in 2025.”
Gerard also emphasized how the oil and natural gas industry remains an important source of well-paying jobs for millions of American families.
“America’s oil and natural gas industry supports approximately $1.2 trillion in U.S. gross domestic product,” he said. “For perspective, that is nearly as large as the economy of Mexico, according to the World Bank. Fortunately, we know how to bring about America’s brighter energy future — which means lower costs for American consumers, a cleaner environment and American energy leadership — because it is today’s reality. We call it the U.S. model. Simultaneously, the United States is leading the world in energy production; we have one of the strongest western economies and are leading the world in reducing greenhouse gas (GHG) emissions, a trifecta of success unmatched by any other nation.”
Gerard explained the nation’s success as a global energy production and carbon reduction leader is rooted in the U.S.’s unique federal system, which allows the states to be active and semi-autonomous actors when it comes to how their energy resources are developed. America’s system of government, working in combination with its long tradition of entrepreneurship and distinct innovative spirit, has led to world-leading reductions in carbon emissions, which are at near 20-year lows.
“As the State of American Energy report details, the states demonstrate time and again that the best way forward on energy policy is not through legislative mandate, overreaching regulatory oversight or executive branch decree,” he said, “but by using the facts — including what’s worked and what’s best for our energy future, the economy, consumers and the environment — as the guiding principle.
“The states demonstrate how bipartisan compromise, consensus building and collaboration with industry can lead to significant increases in energy production and environmental protection.
“Nationally, according to the latest Environmental Protection Agency data, in 2013 GHG emissions were 9 percent below 2005 levels even as population, energy use and gross domestic product have increased — proof that the U.S. model is the most effective way to better protect the environment while growing the economy and increasing energy production.
According to a study by T2 Associates, the oil and natural gas industry itself reduced its own GHG emissions by the equivalent of 55.5 million metric tons of carbon dioxide (CO2) in 2014.
“Our nation’s emissions are lower as a result of greater use of clean-burning natural gas,” Gerard said. “Further, we have invested $90 billion in zero- and low-carbon emitting technologies from 2000-2014, almost as much as the federal government’s investment of $110.3 billion. We also know what the difference between pro-energy development and anti-energy development will mean to our nation’s economy, businesses, families, consumers and environment.”
Study shows energy could support more jobs, increase revenue
Last year, a study by Wood Mackenzie found with the right energy policies, America’s oil and natural gas industry could support as many as an additional 1 million American jobs in 2025 and as many as 2.3 million by 2035.
“The study also looked at the real-world economic difference between pro-development energy policies and anti-development energy policies espoused by some,” Gerard said. “Specifically, over the next 20 years, pro-development policies could cumulatively increase local, state and federal government revenue by more than $1 trillion and boost household discretionary income by as much as $508 billion. Average annual household energy expenses could be lowered by approximately $360 per year.
“Conversely, national energy policies that discourage energy development and constrain U.S. refiners could lead to a cumulative decrease of $500 billion in government revenue from 2016 to 2035 and increase the cost of energy by $242 annually for the average household.”
According to the EIA, fossil fuels will account for 80 percent of U.S. energy consumption through 2040. The agency estimates even under the best-case scenario for alternative fuel use, fossil fuels will still account for 78 percent of our energy needs.
“Fossil fuels will remain the foundation upon which our modern society rests for decades to come,” Gerard said.
Consumers aren’t buying high-ethanol fuel; RFS outdated
A 2014 Congressional Budget Office study projected the Renewable Fuel Standard (RFS) could raise the cost of fuel prices.
“Given the design of the RFS, the cost of encouraging additional sales of high-ethanol fuel falls on the producers and consumers of gasoline and diesel,” Gerard said. “What’s more, there is very little consumer demand for high-ethanol fuels. According to the EIA, the annual amount of E85 sold in 2014 is less than 1 percent of annual gasoline demand. The reason is simple: Ethanol is less energy-dense than gasoline and, as a result, provides fewer miles per gallon.
“The laudable goals of the RFS — less dependence on imported fuel, lower gasoline prices and reduced emissions — have largely been achieved through industry innovation and market forces. It is well past time that we end or significantly amend the RFS. It is a relic of our nation’s era of energy dependency that poses a direct threat to our nation’s economy, risks reversal of important environmental improvements and could raise energy costs for American consumers.”
According to Gerard, the federal government has direct knowledge of the benefits of natural gas.
“The administration routinely acknowledges that greater use of natural gas in power generation has not only led to greater GHG emission reductions than any other nation, but that it has been a ‘game changer’ in reducing air pollution,” he said. “The president rightly highlights that we have more than 100 years’ worth of natural gas abundance. Yet, in releasing the Clean Power Plan last summer, the White House talking points bragged, ‘the rush to natural gas is eliminated’ — presumably a means to spur more renewable energy.
“In 2015, there were several months in which natural gas produced more electricity than any other fuel for the first time in U.S. history. By no coincidence, that period also saw the lowest carbon emissions from the power sector. And far from reducing opportunity for wind and solar power, natural gas provides the reliable base load power necessary to integrate those intermittent sources.”
According to an IHS study, the amount of energy sector infrastructure needed through the middle of the next decade could spur $1.15 trillion in private capital investment. IHS also projects infrastructure investment could support more than 1.1 million jobs nationally, contribute $120 billion to U.S. gross domestic product and increase revenues to government by more than $27 billion through 2025.
Gerard added while the outcome of November’s elections is far from clear, it is certain no matter who becomes the 45th president of the U.S., he or she will lead a nation that is first in oil and natural gas production, first in refining ever-cleaner fuel and first in reducing GHG emissions.
For more information, visit www.api.org or call (202) 682-8000.
