Oil in Ground Drives up prices
Lawmakers in California recently advanced legislation that would temporarily prohibit hydraulic fracturing - or “fracking” - across the state. The moratorium would be a significant victory for environmental activists who have long advocated for energy policies that “leave the oil in the ground.”
But contrary to the green movement’s wishful thinking, failing to develop America’s oil and natural gas resources will not deliver us to a post-carbon future. It will drive up energy prices, destroy hundreds of thousands of jobs, and deal a blow to our economy - all while threatening America’s national security.
In recent years, a growing number of environmental groups have adopted the “leave it in the ground” rallying cry. In an open letter to the White House in March, 16 environmental organizations asked President Obama to commit “to keeping most of our nation’s fossil fuel reserves in the ground.”
Similarly, a new report from the Sierra Club - one of the country’s largest environmental groups - calls on the president to limit fossil-fuel development projects. “Keeping these dirty fuels in the ground,” the report asserts, “puts our country on a path where our economy is powered by energy that is clean, safe, secure, and sustainable.”
Such statements ignore the fact that our way of life depends on fossil fuels. Failing to develop our country’s oil and gas resources would have devastating economic consequences for average Americans. Moreover, the best way to develop viable alternative energy sources is through economic growth. Leaving the oil in the ground harms economic growth making alternative energy sources less viable, not more viable.
According to the Energy Information Administration, about 60 percent of the petroleum products consumed in the United States are produced domestically. If the environmentalists’ suggestions are heeded, these oil supplies would be eliminated. The result would be a drastic spike in the price of everything from heating oil and gasoline to food and clothing.
Ending domestic oil and gas production would also erase the enormous economic gains generated by the recent boom in hydraulic fracturing. In 2012, fracking increased the real income of the average American household by the equivalent of $1,200 according to a recent report by consulting firm IHS. That same year, fracking boosted economic growth by an estimated $283 billion.
Domestic energy production is also a significant job creator. The oil and gas industry is responsible for 9.8 million jobs across the country according to the American Petroleum Institute. Consulting firm Wood Mackenzie also estimates that increasing energy production could create another 1.4 million U.S. jobs by 2030.
America’s energy renaissance has also eased our dependence on politically unstable parts of the world. The U.S. now leads the world in natural gas production. And, the volume of U.S. production of crude oil is now on par with its imports -- the first time this has occurred in almost two decades.
The environmental activists’ refusal to develop our nation’s rich oil and gas reserves fails to recognize that today’s green energy technologies have little chance of replacing fossil fuels anytime soon. For evidence of this, just look at Germany’s aggressive efforts to transition to alternative energy sources like wind and solar. The initiative provides enormous subsidies to green energy through taxes on power bills.
Since the program’s implementation in 2000, Germany’s residential electricity prices have skyrocketed. Roughly 800,000 Germans -- including 200,000 of the country’s long-term unemployed -- have seen their power cut off due to unpaid bills. And between 2008 and 2013, Germany’s exorbitant energy prices cost the country’s manufacturing sector 52 billion worth of net exports, according to one analysis. Not surprisingly, the German government voted to reduce green energy subsidies earlier in April.
Germany’s experience offers a clear example of what can happen when relatively cheap and efficient sources of energy are abandoned in favor of costly, inefficient green alternatives.
And yet, as California’s anti-fracking legislation shows, this evidence has not stopped some policymakers from making the same mistakes here. Until alternative forms of energy can deliver the same value as oil and natural gas, efforts to end fossil-fuel development will remain deeply irresponsible.
Wayne Winegarden, PhD, is senior fellow at the Pacific Research Institute and a contributing editor to EconoSTATS at George Mason University.