Even as America grabbles with its love-hate relationship with fossil fuels, the ongoing fracking revolution that’s turned the U.S. into the leading global oil producer is shoring up the economy — and helping to tame carbon emissions, too.
A wave of literally ground-breaking advances in technology have unleashed the U.S. energy industry like never before. Oil production has swelled in the past decade to reach an all-time high in 2018 and push the U.S. past Saudi Arabia and Russia to become the world’s top producer for the first time in 45 years.
As recently as 10 or 15 years ago, such a resurgence seemed extremely unlikely if not impossible. The idea of “peak oil” — declining production over time — appeared to be borne out by a seemingly irreversible slowdown in domestic output from the early 1970s to the early 2000s.
The idea goes all the way back to the 1956, when the famed U.S. geologist M. King Hubbert predicted oil production in the U.S. would probably top out within 15 years and then begin a permanent decline. The same thing would happen elsewhere, too.
What Hubbert didn’t count on, according to a new White House economic report, was the soaring prices of oil and the rapid advances in technology that they spawned. Producers sought to find ways to extract energy more cheaply and eventually they succeeded.
The most influential example is the rise of fracking — extracting oil and natural gas from rock formations under the continental U.S. that had long been considered inaccessible. The U.S. has become the world leader in fracking by far.
The result: The death of peak oil as an idea. At the very least, it’s gone into long-term remission.
The reborn U.S. energy industry, meanwhile, has contributed strongly to the economy in the past decade. Companies have hired more workers, invested heavily in equipment such as drilling platforms and fueled demand for an assort of raw materials such as steel.
What’s more, record U.S. petroleum production has helped stabilize the global price of oil and reduce the risk of huge price swings like the one that damaged the economy in 2007-2008, the White House Council of Economic Advisers asserts. The cost of a barrel of oil, now less than $60, briefly topped $160 in 2008.
As the U.S. moves quickly to become a net energy exporter — the latest forecasts say it will happen in 2020 — it will also help to keep huge trade deficits from being even larger. The U.S. trade deficit in 2018 easily would have set an all-time high if not for soaring U.S. exports of natural gas.
An abundance of cheap natural gas, meanwhile, has encouraged many electric companies to switch over from dirtier coal, a traditional mainstay that’s become more costly and less available due to stiffer regulations.
Coal “faces the prospect of declining demand because cheaper natural gas is an attractive substitute,” the White House report noted.
Natural gas NGK19, -1.80% and coal in 2018 both accounted for about 30% of all electricity produced in the U.S., the CEA report shows. By contrast, coal was responsible for about half of all electricity generated a decade ago vs. just 19% for natural gas.
The switch to natural gas from coal, combined with tighter environmental regulations and great improvements in energy efficiency, have reduced U.S. carbon emissions to roughly 1990 levels.
Natural gas is expected to continue to gain ground on coal, offering the prospect of further improvements.
What about the potential of environmental damage by fracking itself?
Critics assert it fouls up drinking water and causes increased tremors or even small quakes, but the last major study by the Environmental Protection Agency at the end of the Obama administration only found a limited impact. The agency said more data was needed.
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