America’s new found effectiveness in extracting oil and gas from underground deposits has boosted U.S. oil production from 5,077 thousand barrels per day in 2007 to 6,498 thousand barrels per day in 2012. Further increases are feasible if prices continue covering production costs. For decades, U.S. oil and gas consumption exceeded production and needed imports from both allies (e.g. Canada, Mexico) and from unstable counties (Iraq and Libya) or hostile producers (Russia, Iran, and Venezuela). Money spent for imports creates few domestic jobs.
Now, production levels are rising toward consumption levels and by 2020 some believe the U.S. will become self-sufficient in crude oil, especially in concert with North American allies. This boon stems from fracking, a technique that makes drilling much more effective.
Today, natural gas is available in such abundance that its U.S. price has plummeted. As a result, U.S. exports of liquefied natural gas have begun in earnest and are likely to attract stable buyers such as Japan, China, and countries in Europe.
The U.S. oil and gas success story improves out balance of payments, creates well-paying domestic jobs and, and makes possible the economic revival in U.S. manufacturing sectors that rely on petrochemicals.
Oil self-sufficiency reduces our exposure to the hijinx of despotic oil producers. That removes a reason for stationing military assets in hostile areas, because if we are independent from an oil despot’s crude, we are not obligated to protect his infrastructure from aggression by other ne’er-do-wells, and we have less reason to put boots on the ground. What’s not to like?
The EPA works against this success arguing that carbon-based products cause global warming. In the design of its own regulations, the EPA uses a so-called “social cost of carbon” (SCC). An SCC should contain the net fair value of societal losses from each ton of carbon placed in the atmosphere. In that scheme, SCC would contain the monetized value of carbon-caused human ailments like emphysema, or of ice melt that erodes coastlines, etc.
A legitimate SCC would also contain benefits from carbon dioxide, such as improved crop yields. But carbon benefits are omitted and the EPA’s political masters ascribe far too much responsiveness to carbon dioxide by the climate. They hiked SCC 60% since early 2013 and it sits at $40 per ton.
That’s a very heavy thumb for the EPA to use on the scales when stacking the deck against oil and gas production. If they insist on this chicanery, at the very least, they should modify these regulations to save U.S. military lives, create U.S. jobs and save consumers a little money.
Alan Daley is a retired businessman who lives in Florida and who writes for The American Consumer Institute Center for Citizen Research