PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

5 Key Points on U.S. Energy Production and Trade

By at 7 June, 2016, 4:51 pm

 

 by Raymond J. Keating-

Private sector entrepreneurship, investment and innovation, including in hydraulic fracturing and horizontal drilling, have transformed the United States on the energy front. And the impact of this energy revolution has spread effects into international markets and trade.

Consider 5 key points regarding U.S. energy innovation, production and trade:

World’s Largest Oil and Natural Gas Producer

The U.S. now ranks as the world’s largest producer of natural gas, and of crude oil and natural gas liquids (NGLs). The U.S. became the top natural gas producer in 2010, and grabbed the top spot in crude/NGL production in 2014.

Big U.S. Production Increases

In terms of crude oil, annual U.S. production (thousand barrels per day) grew by 89 percent from the recent low in 2008 to 2015. The 2008 level was the lowest since the 1940s, while 2015 output was the highest since 1972.

As for natural gas, annual U.S. marketed production (million cubic feet) expanded by 52 percent from 2005 to 2015. The 2015 natural gas production level was an all-time high for the U.S. In fact, the U.S. has set new production highs in each of the last five years.

Big Shifts on the Trade Front

With such dramatic increases in domestic production, it’s not surprising to see major shifts on the energy trade front. As the U.S. Energy information Administration reported in April of this year, “U.S. primary energy net imports declined for the 10th consecutive year. Imports rose 2%, but that increase was outpaced by a 6% increase in exports. Petroleum products accounted for 71% of U.S. primary energy exports. The fuel mix of energy exports continues to change. In 2008, the U.S. exported more than twice as much coal as natural gas. In 2015, the U.S. exported only 0.1 quadrillion Btu more coal than natural gas…  Natural gas exports are expected to continue growing as the United States transitions from a net importer to a net exporter of natural gas by mid-2017.”

Regarding crude oil and petroleum net imports, after rising steadily from 1985 to 2005, they have since declined markedly. In fact, from 2005 to 2015, net imports of crude oil and petroleum products fell by 63 percent. In 2015, net imports were at their lowest level since 1985. As for crude oil and petroleum exports, they have been on the rise since 2001, increasing by 389 percent from 2001 to 2015.

Similarly, net imports of natural gas dropped by 75 percent from 2007 to 2015, and in 2015 registered their lowest level since 1986. Looking at U.S. natural gas exports, they increased by 146 percent from 2006 to 2015.

Policy Changes Regarding Energy Exports

Looking ahead, the U.S. is well positioned to play a key role in meeting growing energy demand around the globe. However, our own government needs to get out of the way, for example, by rolling back counter-productive tax and regulatory policies imposed on U.S. energy producers. That includes policies affecting trade. Of the two major impediments to U.S. energy exports, one has been removed, while the other still needs action. In December of last year, Congress voted to and President Obama signed into law an end to the nonsensical, four-decade-old ban of U.S. crude oil exports. That repeal was a major step forward.

But there’s still the problem of liquefied natural gas (LNG) export permit approvals (to nations that the U.S. does not have free trade agreements with) being bureaucratic and slow, thereby creating uncertainty and competitive difficulties for U.S. firms. Fortunately, each chamber of Congress has passed legislation that would streamline and accelerate the LNG approval process, with the Senate measure, for example, requiring a Department of Energy decision on an export license within 45 days of the project being given the environment approval by FERC. A conference committee is the next step toward making such sensible policy a reality. Let’s hope that Congress and the President make this happen very soon.

Small Business and Energy

Increased energy production and expanding opportunities in the international marketplace are good news for the small businesses that overwhelmingly populate the energy industry. Consider that 90.7% of employer firms among oil and gas extraction businesses, 78.1% of drilling oil and gas wells businesses, 81.5% of firms among support activities for oil and gas operations businesses, 60.5% of oil and gas pipeline and related structures construction businesses, and 54.7% of firms among oil and gas field machinery and equipment manufacturing businesses have less than 20 workers. Quite simply, the energy business is big business for small business.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

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