Forty years ago, the United States was thrown into a panic by the Arab Oil Embargo. OPEC’s decision to stop oil exports to the U.S. in response to our support of Israel during its war with Arab nations triggered lines and shortages at gasoline stations and revealed the U.S. economy’s dependence on foreign oil.
Experts predicted we would run out of reachable reserves of natural gas within just a few years. America faced an energy crisis and on April 18, 1977, President Jimmy Carter confronted the nation with what was the hard truth of the day.
“The oil and natural gas we rely on for 75 percent of our energy are running out,” the President somberly intoned in a speech to the nation. “Unless profound changes are made to lower oil consumption, we now believe that early in the 1980’s the world will be demanding more oil than it can produce.”
The ominous prediction did not hold true. Energy consumption worldwide has continued to rise, but the increased demand has been offset by new technologies—primarily hydraulic fracturing—that has enabled drillers to reach previously inaccessible supplies of oil and natural gas. We have also benefited from significant improvements in energy efficiency.
Consider where we are now. The Financial Times reports that “The U.S. is overtaking Saudi Arabia to become the world’s largest producer of liquid petroleum (oil and natural gas) in a sign of how booming oil production has reshaped the energy sector.”
One of the myriad benefits of the oil and shale boom is that instability in the Middle East is not as likely to trigger dramatic swings in energy prices. Christof Ruhl, BP’s chief economist, told the Wall Street Journal earlier this year that oil-price “volatility is at its lowest level since the early 1970’s.”
West Virginia is playing an important role in the resurgent domestic petroleum industry. According to the Energy Information Administration, shale gas production in the state has risen from just 11 billion cubic feet in 2009 to 345 billion in 2012 (the latest year figures are available).
The state is benefiting significantly from the growth. The West Virginia Oil and Natural Gas Association says the industry employs 26,000 people in primary and secondary jobs, paying $1.9 billion in wages. The industry paid the state $162 million in severance taxes in the 2014 fiscal year, twice as much as the year before. Counties where drilling is taking place received $91 million in property taxes.
Still, all natural resources are finite and predictions about available reserves are notoriously speculative. However, it’s clear that the United States is enjoying an energy production renaissance. Consumers are benefiting from relatively cheap, reliable energy and West Virginia is prospering as a source of that energy.
The United States is no longer subject to OPEC’s stranglehold.