All through the years of the great recession, during the bombed out aftermath of 2008’s financial crisis that saw jobs, wages, and growth recover at a frustratingly slow pace, something unusual began to happen in states like North Dakota and Pennsylvania: oil and gas production began to grow and then accelerate - beginning from low, inconsequential levels. Improbably, the State of North Dakota now produces more oil than former OPEC state Indonesia. And Pennsylvania’s natural gas production has grown so quickly, volumes have risen over twelve-fold in just the past 48 months, that were the Keystone State a country, it would now rank as the 10th largest producer in the world.
But the momentous changes in America’s energy profile don’t end there. The great recession and the oil shock of 2008 triggered long-cycle changes in the way Americans actually use oil: walkable neighborhoods, electric vehicles, and train travel have all become popular as US drivers throttled back their gasoline consumption. The result is that for every three barrels of new, homemade oil coming out of plays in Texas, North Dakota, Colorado and Oklahoma, Americans have walked away from 2 barrels of their previous, sky-high oil demand. The result is a profound change in America’s energy balance sheet. And the spread—the difference between the energy America consumes and the energy it still has to import—has shrunk to a tiny version of its former self. These days there is a 10% difference in that spread; as recently as 2005 the difference was a steep 30%. The implications, for the US trade deficit, economy, interest rates, and the US Dollar are broad and already spreading. And the geo-political ripple effects of America’s shrinking energy spread, the recent volatility in oil prices notwithstanding, are starting to steamroll forward.
Since President Obama came to office, US energy production has increased by over 13 quadrillion BTU from 2009 through 2014—the largest five year advance in half a century. The President is no oil and gas man, to be sure. But the unabated drill, drill, drill frenzy in the US since 2009 punctures dearly held political beliefs on both the right and the left, about our President’s perspective on the use, retrieving, and future of fossil fuels.
In early 2012, President Obama made it clear that, in pursuit of solving, America’s energy difficulties he would continue to aggressively pursue every energy source possible: wind, solar, nuclear, efficiency programs and yes, oil and gas. “We can’t have an energy strategy for the last century that traps us in the past. We need an energy strategy for the future – an all-of-the-above strategy for the 21st century that develops every source of American-made energy," said the President. Second, the President has repeatedly stated his goal, from his 2010 State of the Union Speech, to double America’s exports. That goal has nearly been met - US exports are up from $1.6 trillion in 2009 to $2.3 trillion in 2014—and energy exports have formed a nice little piece of that puzzle, at about 7.5% of the total. But there’s more. Because in a flurry of federal level approvals from the Department of Energy (DOE) and the Federal Energy Regulatory Commission (FERC) this Spring and Summer, the President’s administration is now set to deliver its fossil fuel coup-de-grace: a wave of new LNG (liquefied natural gas) export terminals to be built between now and 2020 that will export as much as 10% of US daily natural gas production. Eclipsing Russia in 2009 as the largest natural gas producer globally the US is now on the threshold of sending that gas out into the world: a new, LNG exporting giant. Intriguingly, both the President and the Administration have been quiet on this major policy shift, avoiding any self-congratulatory announcements or press briefings. Instead, louder reactions have come from Congress, where there are legitimate concerns a huge upswing in LNG exports could increase natural gas prices for Americans, here at home. This was exactly the experience in Australia, where a significant LNG export program is also underway. Indeed, various industries in the US that also thrive on exceedingly cheap natural gas, like the chemicals industry, have also voiced alarm to the administration about the torrid pace of 2014's LNG export approvals.