The story of the shale revolution is not just the scuttled claims that we're running out of energy resources. It is also an important lesson about American exceptionalism and the conditions that made this breakthrough possible.
The shale revolution likely could not have emerged and resiliently endured in any country other than the U.S. The still young energy miracle is an achievement of technological innovation, determination, and economic freedom operating within a country that respects free enterprise and competitive markets.
President Trump's reform agenda to stimulate economic growth and to eliminate excessive, burdensome regulations is igniting the roaring productivity of the American shale fields. Unleashed by supportive energy policy and rebounding from the collapse of oil prices in 2014, shale producers keep setting record output while cutting costs with Texas leading the pack.
Instead of nationally owned oil companies, cartels, and multinational corporations, the shale revolution is the work of small to medium-sized energy companies in the only country in the world that recognizes private property rights in subsurface minerals.
The shale of the shale revolution is what petroleum geologists call the “source rock” — a kind of cradle in which crude oil and natural gas are formed over millions of years deep within the Earth. Geologists were long aware of these prolific shale resources, thought to be forever locked in rock.
Then, determined and creative geologists developed the technologies that broke the code and made shale resources accessible. The shale producers are continuing to refine these technologies. In so doing, they are accelerating natural geologic processes by hundreds of millions of years — no small feat!
The Energy Information Administration forecasts that shale oil from the Permian Basin in Texas alone will account for 50 percent of all new global oil production over the next five years. As Bloomberg noted: "The fate of U.S. oil and ultimately a large slice of the total additional output for the entire world is all predicated on aggressive forecasts from one place: the Permian Basin.”
Driven by record-breaking production levels, Texas’ economy grew faster than any state in 2017, two and half times faster than Obama-era GDP.
Last year, output from shale oil and natural gas in Texas literally fueled growth in manufacturing, which significantly outpaced the national average. Mainstream economists rarely recognize this synergy between manufacturing and the abundant, concentrated, versatile energy in fossil fuels. And the jobs created by this growth pay well, to say the least.
A study by PricewaterhouseCoopers showed that U.S. oil and natural gas industries supported 10.3 million jobs in 2015. In 2016, Texas shale industries accounted for more than 325,500 direct jobs with an average annual wage of $130,000.
Such “shared prosperity” extends beyond employees and interest owners to property owners, investors, schools, local, state, and federal coffers as well as the many service companies in the supply chain supporting upstream oil and gas extraction. Add to those economic benefits the expanding petrochemical industries. As of August 2017, 134 new projects totaled investments of $71 billion. Pipelines under construction or planned account for an investment of $6 billion according to the leading industry association in Texas.
Rapidly growing exports of domestic crude oil, petroleum products, and liquefied natural gas have already begun to reduce the U.S. trade deficit. The U.S. is now a net exporter of natural gas, exporting more natural gas than is imported for the first time since 1957, says the Department of Energy.
Crude oil output is expected to average 10.7 million barrels of oil per day in 2018, exceeding the highest average on record. The U.S. is already the world's largest producer of natural gas and is forecast to surpass Russia and Saudi Arabia as the world’s largest producer of crude oil in the near future. After seven former presidents unsuccessfully vowed to achieve energy independence, the U.S. is now finally on track to become energy independent and dominate global markets. By some measures, U.S. output already has earned the top spot.
This doesn’t just happen anywhere in the world, against heavy odds and in such a relatively short time. It happened here, demonstrating that freedom, hard work, innovation, and courage — quintessential American values — are perhaps the most important resources of all.
This commentary was originally featured in the Washington Examiner on June 18, 2018.