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Energy & Environment

Innovation-Driven Energy Dominance Is a Win for American Consumers

3 minute read

The United States has been a net importer of oil and petroleum products since at least 1949. But, in its most recently released Short-Term Energy Outlook, the Energy Information Administration (EIA) estimates that the United States was a net exporter of crude oil and petroleum products in September 2019. EIA also forecasts that the United States will be a net exporter of crude oil and petroleum products for all of 2020.

This historic achievement follows the United States becoming the world’s top producer of crude oil in 2018, a net exporter of natural gas in 2017, and the world’s top producer of natural gas in 2011. U.S. energy innovation, epitomized by the shale revolution, drives this historical production boom. And, as President Trump said last month, “a thriving energy industry not only benefits hardworking Americans… who live in shale country; it is an enormous benefit to citizens across our country…”

CEA’s recent paper on the benefits of energy innovation finds that the shale revolution has delivered immense consumer welfare gains. From 2007 to 2019, innovation in shale production brought an eight-fold increase in extraction productivity for natural gas and a nineteen-fold increase for oil. CEA estimates that shale-driven improvements in energy productivity reduced the domestic price of natural gas by 63 percent and led to a 45 percent decrease in the wholesale price of electricity. Shale also reduced the global price of oil by 10 percent. These substantial price decreases far exceeded earlier government projections.

Because of these price decreases, CEA estimates that the shale revolution saves U.S. consumers $203 billion annually, or an average of $2,500 for a family of four. Because low-income households spend a larger share of their income on energy bills, lower energy prices disproportionately help them by allowing families to have more money to allocate to what they desire. Shale-driven savings are experienced by each household income quintile, but they represent 6.8 percent of income for the poorest fifth of households compared to 1.3 percent for the richest fifth of households.

Beyond saving Americans money on their energy bills, the shale revolution has generated immense environmental benefits.

CEA estimates that from 2005 to 2017, the shale revolution lowered U.S. energy-related greenhouse gas emissions by 527 million metric tons per year. Shale contributed to a greater decline in greenhouse gas emissions relative to the size of the economy in the United States than in the European Union over that period, even though the European Union developed and expanded a government-run cap-and-trade system that increased energy costs for consumers. The United States also had greater declines in harmful particulate emissions compared to the European Union over that period.

This unforeseen shale-driven decline in greenhouse gas emissions is larger than what the Environmental Protection Agency (EPA) projected for the 2012 fuel economy and greenhouse gas standards for cars and trucks, and more than double what EPA projected for its now-replaced plan to reduce emissions from power plants. Importantly, the shale revolution has brought large emissions reductions without new government-imposed costs on American businesses or households.

From these results, it is clear that private-sector innovation can be more effective than heavy-handed government policies.

Achieving net oil and natural gas exports, the status of the world’s top oil and natural gas producer, $2,500 in average annual energy savings for American families, and decreased emissions would not have been possible without the shale revolution. The Trump Administration remains dedicated to advancing policies that promote future private-sector energy innovations. This commitment to unleashing America’s abundant human and energy resources should continue delivering consumer and environmental gains for years to come.