by Raymond J. Keating –
The story of U.S. energy production is a wondrous example of how technological developments can transform what many considered an old-line industry. Technological advancements – such as advancements in hydraulic fracturing and horizontal drilling – took the U.S. from seemingly being destined to rely more and more on foreign sources of energy to becoming the largest energy producer in terms of oil and natural gas on the planet.
As noted in the following chart, we see the long decline U.S. crude oil production had been on from roughly 1970 to 2008, and then the dramatic jump in production that continued until the pandemic hit. Crude production took a dive in April and May of 2020, and has subsequently been slowly climbing back. However, as of August of this year (latest data from the U.S. Energy Information Administration), production remained below the pre-pandemic levels.
The same basic pattern has played out with natural gas.
Production was on a general decline into 2006, and then U.S. output picked up dramatically. Record high production was hit in December 2019, with output falling with the pandemic from April through June. Growth resumed, and the August 2021 level was back at a pre-pandemic level (though not at the pre-pandemic high).
Industrial production data would indicate that energy production, while taking a dip in September, experienced strong growth in October.
Energy has been a good news story for much of the past 15 years. However, this was in spite of hostility toward it during the Obama administration, and now the degree of political and policy hostility during the Biden administration has been ratcheted up even more. Indeed, it is quite clear that the Biden administration is set on undermining U.S. energy production.
That’s bad news for all U.S. entrepreneurs, businesses and consumers in terms of energy costs. And it’s deeply troubling for the small businesses that make up the vast majority of businesses operating in the energy sector, such as 95.9 percent of employer firms in the oil and natural gas extraction sector having fewer than 100 workers.
As is the case with all sectors of our economy, maintaining a policy agenda of low taxes, light regulation, and avoiding industrial policy will lead to greater entrepreneurship, investment and innovation, all disciplined by competition and consumer sovereignty. It’s long overdue for politicians to learn that energy is no different.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.