Surging U.S. oil production has sent oil prices tumbling.
The shale revolution, which began here at home, has driven oil prices down 25 percent since June, and OPEC is reeling. With the U.S. now the worlds largest natural gas producer and soon to become the worlds largest oil producer, it may be tempting to think that the world, particularly the United States, has entered a new age of energy abundance, but that would be a grave mistake.
The instability that has driven up oil prices over the past yearconflict in Libya, the Russian invasion of Ukraine, sanctions on Iran and war in Iraq and Syriais far from over. The market may have grown accustomed to geopolitical turmoil in key energy producing states, but the threat of major supply disruptions has not gone away.
In fact, just a few months ago many analysts thought it a small miracle that oil prices, already well above $100 per barrel, werent climbing higher. Why not? The reason is that U.S. production, up more than 60 percent since 2008, was almost singlehandedly keeping prices in check.
Holding oil prices steady wont just take keeping existing production online, it will also require adding new sources of supply. The global demand for oil continues to rise. Millions of new drivers are filling Chinas and Indias roads every year.
Unfortunatelyand erroneously, in all likelihoodwar-torn Iraq recently was named by the International Energy Agency (IEA) as the key country for meeting growing world oil demand in the coming two decades.
In May, the IEA reported that Iraq was producing 3.4 million barrels of oil per day. IEA projections pegged Iraqi production rising to 5.8 million barrels per day by 2020 and to 7.9 million barrels per day by 2035. As U.S. laser-guided bombs now are trying to stem the ISIS advance on Iraqi oilfields, these projections look wildly optimistic, if not absurd.
Almost 1 million barrels of crude oil are being pumped in Libyathe same Libya that doesnt have a central government and is again in the midst of civil war.
The world needs U.S. oil production more than ever.
Shale oil production isnt just an American success storyit has been a lifesaver in the global energy marketplace. And despite the Obama administrations willingness to take credit for the surge in domestic production, it has come largely despite the administrations effortsnot because of them.
Mr. President, you didnt build our globally important energy sector.
Shale production takes place almost entirely on private land where regulation of drilling is handled, quite effectively, by the states. While total U.S. oil production has increased dramatically in the past few years, production on federal lands between 2009 and 2013 is down 6 percent. Of course, the physical locations of shale deposits contribute to that trend, but substantial regulatory and permitting hurdles continue to keep many acres of publicly owned lands off limits to exploration and recovery.
Smarter energy policy peels back the barriers to environmentally responsible energy production on federal lands and resists calls to overregulate the burgeoning shale revolution. The world needs the steadying hand of expanding U.S. energy supplies, and communities across the country need the good jobs that come with sustained and sustainable private investment in energy development.
Mrs. Clinton, dont let anyone tell you that only the public sector is responsible for economic prosperity.
Just because we are in a season of oil and natural gas plenty now does not mean that winter will not return. So, lets all enjoy lower prices at the pump while they last, but craft an energy policy as if they are the exception, not the rule.
|William F. Shughart II is Research Director and Senior Fellow at the Independent Institute, J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, Editor-in-Chief of Public Choice, editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination, and co-author of the Independent Briefing, Plastic Pollution: Bans vs. Recycling Solutions.|
So-called sin taxesthe taxing of certain products, like alcohol and tobacco, that are deemed to be politically incorrecthave long been a favorite way for politicians to fund programs benefiting special interest groups. But this concept has been applied to such sinful products as soft drinks, margarine, telephone calls, airline tickets, and even fishing gear. What is the true record of this selective, often punitive, approach to taxation?