Unleashing the North American Energy Colossus: Hydrocarbons Can Fuel Growth and Prosperity
The United States, Canada, and Mexico are awash in hydrocarbon resources: oil, natural gas, and coal. The total North American hydrocarbon resource base is more than four times greater than all the resources extant in the Middle East. And the United States alone is now the fastest-growing producer of oil and natural gas in the world.
The recent growth in hydrocarbons production has already generated hundreds of thousands of jobs and billions in local tax receipts by unlocking billions of barrels of oil and natural gas in the hydrocarbon-dense shales of North Dakota, Ohio, Pennsylvania, Texas, and several other states, as well as the vast resources of Canada’s oil sands.
It is time to appreciate the staggering potential economic and geopolitical benefits that facilitating the development of these resources can bring to the United States. It is no overstatement to say that jobs related to extraction, transport, and trade of hydrocarbons can awaken the United States from its economic doldrums and produce revenue such that key national needs can be met - including renewal of infrastructure and investment in scientific research.
An affirmative policy to expand extraction and export capabilities for all hydrocarbons over the next two decades could yield as much as $7 trillion of value to the North American economy, with $5 trillion of that accruing to the United States, including generating $1-$2 trillion in tax receipts to federal and local governments. Such a policy would also create millions of jobs rippling throughout the economy. While it would require substantial capital investment, essentially all of that would come from the private sector.
The underlying paradigms embedded in American energy policy and regulatory structures are anchored in the idea of shortages and import dependence. A complete reversal in thinking is needed to orient North America around hydrocarbon abundance - and exports.
In collaboration with Canada and Mexico, the United States could - and should - forge a broad pro-development, pro-export policy to realize the benefits of our hydrocarbon resources. Such a policy could lead to North America becoming the largest supplier of fuel to the world by 2030. For the U.S., the single most effective policy change would be to emulate Canada’s solution for permitting major energy projects: create a one-portal, one-permit federal policy for all permits.
The recent preoccupation with technologies directed at creating alternatives to hydrocarbons misses how technology also unleashes alternative sources of hydrocarbons themselves. A number of detailed analyses of the new hydrocarbon realities have emerged, not least of which are excellent ones from Citi, Wood Mackenzie, IHS, and the U.S. Chamber of Commerce.
The authors of Citi's detailed report “Energy 2020: North America, the New Middle East?” note that “[t]he main obstacles to developing a North American oil surplus are political rather than geological or technological.”
The projected growth in total world energy demand through 2030 is equal to an additional two Americas’ worth of consumption. Every credible forecast shows hydrocarbons fueling the major share of that growth, as they have in the past. While alternative energy has grown rapidly, the overall contribution to U.S. and world supply remains de minimus and stays that way in every credible future scenario.
There will doubtless be objections to the idea of a radical shift in policies and attitudes toward hydrocarbons. But the benefits to the U.S., to the rest of North America, and to the rest of the world are so dramatic and important that abandoning them without serious policy deliberations would be unconscionable.