“Our country has inherited an energy-dependent country from previous generations, and in recent years, we’ve struggled to be self-sufficient in producing low-cost, abundant and reliable energy.”
— Secretary of the Interior Ryan Zinke, in remarks during a speech at the Heritage Foundation, Sept. 29, 2017
During a speech at the Heritage Foundation on Sept. 29, Secretary of the Interior Ryan Zinke laid out his vision for U.S. energy dominance. In his opening remarks, Zinke said the Trump administration does not support an agenda of “regulation and red tape,” which he argues keeps the U.S. reliant on foreign energy sources and weakens its national security.
Since taking office, Zinke has pushed to expand drilling on public land, reinvigorate the coal industry and roll back regulations on energy production to move the U.S. toward his vision of being “the strongest energy superpower this world has ever known.”
To support his agenda, Zinke laments the current state of U.S. energy production, asserting that the country has struggled in recent years to produce “low-cost, abundant and reliable energy.”
How do his claims square with the facts? Let’s take a look.
The primary energy sources in the United States are coal, natural gas, petroleum, nuclear electric power and renewable energy. Electricity is considered a secondary source, which is generated from the primary energy sources. Domestic energy production in the U.S. has increased since 2005, when it reached historic lows. As of 2016, the U.S. produced 86 percent of the energy it consumed, according to the Energy Information Administration.
The increase in production is primarily fueled by a dramatic increase in the production of natural gas and crude oil. Recent technological advances in drilling have opened up large stores of crude oil and natural gas trapped in shale and other dense rock formations. The process, hydraulic fracturing, commonly known as “fracking,” has sparked what many call the “shale revolution,” for its far-reaching impact on the energy industry.
Just how big an increase in U.S. production capacity?
Big. As a 2014 report from the Congressional Budget Office put it: “The shale gas increase has been so large that, if it came from a separate country, that country would now be the world’s third-largest natural gas supplier (behind first-place Russia and the U.S. supplies not from shale).”
As the production of natural gas increased, the price plummeted. In 2016, natural gas prices were the lowest they’ve been since 1999. “In the mid-2000s, natural gas hovered around $6, $7 or $8 per one million Btu,” said Francis O’Sullivan, research director at MIT Energy Initiative. “Today it’s around $3.”
Retail gasoline prices have also reached new lows. In 2016, the average price of gasoline was the lowest it has been since 2004, hovering around $2.14 per gallon. The price reduction is primarily because of low crude oil prices, which declined as domestic production increased.
Cheap and abundant natural gas has replaced coal as the primary source of electricity generation. From 2011 to 2015, energy production from coal declined 15 percent. The EIA estimated these trends will continue into 2018, as the electricity industry plans to expand its capacity to produce energy from natural gas in response to its continued low cost and environmental regulations.
There’s one catch. Despite the rise in low-cost natural gas in electricity production, residential electricity prices have increased over the past several years. The EIA notes several factors for higher prices, namely increased investments in transmission infrastructure and new requirements to generate electricity from renewable sources. From 1997 to 2012, infrastructure investment increased fivefold, from $2.7 billion to $14.1 billion. The upgrades aim to improve reliability, include renewable energy sources, and to accommodate changes in electricity demand.
In the first six months of 2016, residential energy prices declined for the first time in 14 years, according to the EIA.
The rise in the domestic production of domestic oil and natural gas also triggered a decline in foreign oil imports. In 2016, the U.S. imported 10.0 million barrels per day of petroleum, which includes crude oil, natural gas plant liquids, liquefied refined gases, and refined petroleum products such as gasoline, diesel fuel and biofuels. Crude oil comprised roughly 78 percent of the gross petroleum imports in 2016.
In 2005, roughly 60 percent of U.S. oil consumption came from foreign sources. By 2010, oil dependence, or the ratio of net imports to consumption, fell to 49 percent, and in 2016, oil dependence was down to 25 percent.
The downward trend is a result of several factors, according to the EIA. Increases in the domestic production of crude oil and domestic fuels, as well decreases in oil consumption (a result of the 2008 financial crisis), have all contributed to the reduction in imports. Additionally, improvements in energy efficiency, including energy-efficient vehicles, have also decreased U.S. dependence on foreign oil sources.
In addition to the increased production of natural gas and crude oil, renewable energy sources are a growing segment of U.S. energy production. From 2013 to 2016, more than half of new electricity-generating capacity came from renewable sources such as wind, solar and hydroelectric. In 2016, renewables made up 63 percent of the new capacity additions. Over the past several years, the cost of renewable energy technology has declined, while its production capacity has increased, paving the way for expanded use of renewable sources in electricity generation
“Increasingly, investors turn to markets of renewable energy, initially spurred by policy, but lately spurred by increasingly and ever more attractive economics,” said Tim Boersma, senior research scholar at Columbia University’s Center on Global Energy Policy.
In 2015, the cost of installing utility-scale solar energy panels was $2.08 per watt, down from $5.70 per watt in 2008. The cost of electricity generation from wind power has also declined over the past several decades hovering between 5 to 10 cents per kilowatt hour. In the 1980s, the cost was as high as 65 cents per kilowatt hour.
Interior Department spokesman Alex Hinson, in defending Zinke’s claim, said that “while some energy sources may have been either low-cost, abundant, or reliable in recent years, very rarely have the sources been all three at once.” Hinson also notes that Zinke was not referring to one particular resource in his claim. Instead, he said, the secretary is focused on reducing energy costs by rolling back regulations on energy production that were imposed by the previous administration.
The Pinocchio Test
Zinke’s claim that the U.S. has struggled to produce “low-cost, abundant, and reliable energy sources” just doesn’t square with the current state of domestic energy production. Even though the United States does not produce 100 percent of its energy domestically, in 2016, domestic energy production increased to 86 percent after hitting historic lows in 2005.
The outlook on domestic energy production already is promising. The “shale revolution” led to a dramatic increase in domestic production, lowering the price of natural gas and crude oil, while also lessening U.S. reliance on foreign oil imports. As the price of renewable energy technology decreases, renewables increasingly are used to generate electricity in the United States.
The crux of Zinke’s claim is that regulation increases the cost of U.S. production, and to achieve his vision of becoming an “energy superpower,” the United States needs to cut the red tape. But instead of focusing on all the gains made by the energy industry over the past several years, Zinke obscures the reality of the domestic energy production. For this, he receives Four Pinocchios.
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