It was not so long ago that America’s energy dependence was widely believed to be the most serious threat to our economy and our national security. According to the Department of Energy, in 2004 the U.S. was importing 55 percent of its oil needs of approximately 20 million barrels per day, and the amount reached 60 percent in 2005. It was broadly accepted that imported oil would soon supply 70 percent of our growing energy needs. The financial markets generally believed in the inevitability of steady increases in the amount of imported oil. Oil reached a peak of $147 a barrel by 2008.
Efforts by prior administrations to open public lands for drilling, such as the Arctic Reserve, met with fierce opposition from environmental groups. The National Resource Defense Council, which describes itself as “the nation’s most effective environmental action group,” stated that reserves on public lands were insufficient to put a dent in the country’s needs, and could not be extracted profitably in any case. Moreover, the potential for environmental damage was simply too great to risk the effort. America, it was stated, could not drill its way to energy independence. The remedy was as obvious as Pinocchio’s nose, a vast litany of alternative products and procedures from hybrid cars to solar and wind, crop based fuels, winterizing homes, and many others.
Something has gone awry with these somber assessments. This year the U.S. will import about 46 percent of its oil needs, and for the first time in 61 years will be a net exporter of refined products. Experts predict the improved trends will continue. A Washington-based consulting firm, PFC Energy, predicts that by 2020 the U.S. will rank with Russia and Saudi Arabia as one of the top global oil and gas producers. New technologies such as hydraulic fracturing and horizontal drilling, pioneered in the U.S., have opened vast new sources of natural gas and oil. Additional developments in deep water exploration resulted in the discovery of huge new fields in extreme water depths. These discoveries are mainly in North America and other politically stable areas. The bountiful supply of natural gas will find a thirsty market in the rapidly growing third world, leading to the construction and operation of domestic liquefied natural gas facilities.
One does not have to be an expert in foreign policy to realize the geopolitical benefits from a reduced dependence on Middle Eastern oil. From a domestic point of view these developments also hold very positive potential for our economic growth. People often question where America’s future growth will come from. The oil and gas industry has been a primary contributor to our growth ever since the discovery of Drake’s well in northwestern Pennsylvania in 1859. These developments in shale oil and gas hold equal potential. They underscore the belief that the potential for domestic growth leading to private sector job creation in the U.S. is nowhere near exhausted.
Alfred Lagan is the founder and chairman of Congress Asset Management Company, a respected investment management firm in Boston, MA. Prior to starting Congress in 1985, he held senior investment positions in several financial services firms. Mr. Lagan holds an MBA from New York University with distinction, and a BA in economics from Iona College. He was born in New York City of Irish immigrant parents, and served four years in the Navy.