Energy Independence in 2023
As we celebrate American independence and the great freedoms that come with it, it is also a time to recognize America’s greater energy independence in 2023. Why do we say that since we clearly still import energy? And what does it mean to be energy independent anyway? What is the importance? The Constitution Partners team answered all these questions and more in the sections to follow.
What is Energy Independence?
Energy independence can be looked at in several ways. The first is as producing more energy than we consume. Based on that definition, even if some energy is imported, the United States would still be energy independent since our production is more than enough to satisfy our needs. Most energy experts hold this definition to be correct and make the most sense.
However, it begs the question that if we produce more than we need, why would the United States import energy at all?
The main reason is that the type of energy we import (e.g., crude oil) is a better fit for our energy systems than the energy we produce ourselves. American refineries are well-suited to process heavy, sour crude oils because, until the last decade, America was primarily producing and importing heavy crude oil. The United States retrofitted all refineries at a very pretty price for heavy crude oil, but the oil produced from the shale oil boom is primarily lighter and sweeter. Thus, American producers can export this oil, while American refiners can import the heavy, sour crude oil that they utilize in many American refineries.
Another reason the United States imports crude oil is to process it and export the finished products. In that scenario, we aren’t importing oil because we need it, but rather because it is financially lucrative to do so.
Another definition of energy independence, which is far less accepted by energy experts and stakeholders, is simply that we don’t import energy at all. The United States began importing crude oil before 1950, and we have imported it every year since. So, under this definition, the United States hasn’t been energy independent in at least 75 years.
Energy Independence by the Numbers
As we approach July 4, the midpoint of this year, it looks like 2022 will still hold the record of the highest level of U.S. energy independence since before 1950. In 2022, U.S. net energy exports grew to 5.94 quads, which is the highest number on record. Total U.S. energy production was also the highest on record. Overall, the U.S. produced 2.5% more energy in 2022 than we consumed. By comparison, in 2005 the U.S. consumed 44% more energy than we produced. You can see all the EIA data for last year here.
The latest weekly report from the Energy Information Administration (EIA) shows current U.S. oil production to be 12.4 million barrels per day (bpd). That’s an increase of 400,000 bpd from a year ago, but still short of the 13.0 million bpd level reached in November 2019. Nevertheless, year-to-date oil production is running ahead of the record 12.3 million bpd level for all of 2019.
The tight oil and shale gas regions continue to be the primary driver of rising U.S. oil and gas production. The Permian Basin has reached an all-time high of 5.8 million bpd, out-producing even Saudi Arabia's massive Ghawar oilfield. However, production gains in the Permian have slowed in recent months, with new wells just offsetting the production decline in legacy wells.
According to the Baker Hughes rig count, the number of wells drilling for oil in the U.S. has declined by 5% since last year. However, the inventory of wells that were previously drilled but uncompleted (DUC) also continues to decline. Over the past year, the DUC inventory has decreased by 8%, but it’s down a whopping 45% over the past three years. For perspective, the DUC inventory is now at its lowest level in about a decade.
Why is Energy Independence important?
Energy independence is important for national security, economic stability, and environmental sustainability. Reducing dependence on foreign energy sources enhances national security by reducing vulnerability to geopolitical disruptions and conflicts that can impact global energy markets. Increased domestic production of energy, more than we can consume, allows America to assist our friends overseas. This past year, for example, the United States supplanted almost all Russian supplies of natural gas to our European allies. Energy independence also promotes economic stability by reducing exposure to price fluctuations in international energy markets. It provides opportunities for job creation and domestic economic growth within the energy sector.
Challenges to Energy Independence
While the United States has made significant progress in increasing domestic energy production in recent years, achieving complete energy independence remains an ongoing challenge. Several factors contribute to this:
Energy Infrastructure: Upgrading and expanding energy infrastructure, including power grids, transmission lines, pipelines, and storage facilities, is necessary to support increased domestic energy production and distribution.
Research and Development: Continued investment in research and development is essential to advancing technologies in carbon capture, renewable energy, energy efficiency, and energy storage systems, making them more cost-effective and accessible.
The Strategic Petroleum Reserve (SPR) remains a concern, as the current inventory is at the lowest level since 1983. Over the past year, the level of the SPR has been depleted by 31% in an effort to combat rising oil prices. That arguably helped stem the rise in oil prices last year, but it removed a substantial cushion the U.S. had in case of a real emergency.
Progressing energy independence requires diversifying energy resources, establishing favorable policies, incentives, and regulatory frameworks, encouraging investment in grid modernization, fostering international cooperation, and supporting energy research and development initiatives. This also requires nations to explore and develop domestic energy resources, including oil, natural gas, and coal, while ensuring responsible and sustainable extraction practices.
Recent US Efforts to Onshore Energy
The Inflation Reduction Act, promote both energy independence and security within the United States. It bolsters American energy security by implementing policies supporting a reliable energy supply and cleaner production methods. For example, the bill includes billions to modernize the electric grid, build a nationwide network of electric vehicle chargers, strengthen the battery supply chain, expand public transit and passenger rail, invest in new clean energy and emissions reduction technologies, improve resilience in physical and natural systems, and clean up legacy pollution in communities across the country.
Additionally, the Bipartisan Infrastructure Law allocates $27 billion towards enhancing and modernizing the national electrical grid, making it more resistant to extreme weather events and cyber threats. These efforts are accompanied by significant investments in manufacturing energy technologies within the United States, marking a historic commitment to fostering a sustainable and self-sufficient energy sector.
Finally, as part of the recent Fiscal Responsibility Act, language was included to expedite the permitting process for building out energy infrastructure. It imposes timelines for federal agencies to review and approve new major energy projects. It also requires agencies to complete environmental reviews in one year for simpler energy projects, or two years maximum for more environmentally complex projects. Democrats who championed the debt ceiling bill say it will streamline communication between federal agencies by setting up a single agency to take the lead on a more streamlined environmental review process.
The deal also helps greenlight the Mountain Valley Pipeline – a natural gas pipeline that would run through parts of West Virginia and Virginia. The pipeline has been championed by Sen. Joe Manchin (D-WV) and has been heavily opposed by environmental groups and some congressional Democrats.
The bottom line is that by diversifying energy sources, improving energy efficiency, expanding domestic production, and implementing supportive policies, we can make significant strides toward achieving this objective. Doing so can strengthen our nation's security, economy, and environmental sustainability while paving the way for a brighter future.