House Committee Eyes Energy Independence
On September 13, the House Energy and Commerce Subcommittee on Energy and Power held a hearing on American energy independence, entitled, “The American Energy Initiative: A Focus on the Outlook for Achieving North American Energy Independence Within the Decade.” Inspired by the success of the oil and gas industry in the past few years in producing more hydrocarbons, many energy analysts and policymakers predict that the U.S. could become “energy independent” by 2020.
A better way to phrase the goal would be energy “self-sufficient” since we cannot, nor should we be, “independent” of world oil markets. Even if we succeed in producing as much oil as we consume, we will still be subjected to the world price of oil, so we will not be “independent” from the rest of the world.
Nevertheless, Subcommittee Members were optimistic that domestic energy production can match demand by the 2020. This sentiment was echoed by several of the hearing’s witnesses. The main theme boiled down to the fact that improved technology, as opposed to policies, has been the underlying driver of new energy production.
Harold Hamm, CEO of Continental Resources and an energy advisor to Republican Presidential Nominee Mitt Romney, credited technological innovation for the resurgence in American oil production. “That one technology that has been developed, primarily by our company and others…that’s horizontal drilling.”
He went on to talk about the precision of the new drilling technique, “the ability to drill down two miles, turn right, drill two to three miles further and hit your lapel pin if we want to.” While in the past, he noted, drillers sought liquid oil, now they can go after harder to reach oil – in tight rock, heavy oil and tar sands.
He noted that in 2005, the energy industry believed that the U.S. had only about 7 years of natural gas supply. Due to technological advances however, drillers now believe the nation has 125 years’ worth of natural gas.
Dr. Daniel Ahn, Chief Commodities Economist at Citigroup, reiterated Harold Hamm’s optimism about new oil supply. He projects that from 2011 to 2020, U.S. liquid petroleum production will increase from 9 to 15.6 million barrels per day, enough to vault the U.S. up to first place in world oil production.
However, in addition to the supply picture, he emphasized the importance of declining oil demand in the United States. Citigroup estimates that U.S. oil demand will decline from 19 to 17 million barrels of oil per day over the same timeframe. He credited the decline in demand to improved vehicle efficiency standards, and switching from oil to natural gas.
The Managing Director of Equity Research at Raymond James & Associates, John Freeman, also credited technological improvements as the main driver to increased domestic hydrocarbon production. He stressed that the surge in oil and gas production over the last few years had nothing to do with policy changes, but more to do with improved technology.
Although the hearing focused on oil and gas production, discussion turned to renewable energy and climate change. Daniel Weiss, a Senior Fellow at the Center For American Progress, a liberal think tank, noted the pitfalls in pushing too hard for oil and gas production, “Promoting an energy independence plan that increases carbon pollution is like setting your house on fire to stay warm. It may work at first but the long term consequences are horrendous.”
Still, the attention remained focused on an achievement that has evaded American policymakers since at least the 1970’s: that by 2020, the U.S. could not only become the world’s largest producer of oil, but finally become energy “independent”.
