A decade after the shale revolution opened a new era in energy production, the United States has emerged as the biggest oil and natural gas producer in the world. Technological innovations made this remarkable achievement possible. But is it sustainable?
Will the pivot from gasoline cars to electric vehicles (EVs) eventually push oil out of the picture? And what about natural gas? Will it still be needed for electricity production if the cost of solar and wind power continues to drop and renewables overtake fossil fuels?
The latest energy data shows that on several days earlier this month solar and wind combined supplied 15% of the nation’s electricity, surpassing coal. That’s a remarkable development, considering that coal dominated power production for decades, accounting for 50% of the nation’s electricity-generating capacity as recently as 2014. Coal’s collapse, of course, was due to competition from low-cost, clean-burning natural gas and the effects of environmental regulations imposed during the Obama administration. Solar and wind, on the other hand, have benefited from federal subsidies and state mandates for renewables.
Despite government financial assistance for solar and wind, oil and natural gas aren’t losing ground to renewables or the emergence of EVs. The problem for oil and gas producers is not supply but demand. People are buying less gasoline and using less electricity due to the pandemic. As a result, oil and gas are in such ample supply that their prices have tanked.
Yet one doesn’t have to be an economist to understand that after the COVID-19 crisis has lifted and people begin commuting to work and more cars are on the roads, oil prices will surely rise. Getting the market back into balance is in the interest of everyone — consumers and oil producers alike.
Over the long term, the demand for oil is projected to fall but not by much. Even as the EV fleet grows as we head into an age of advanced electronic technology, oil will remain the preferred source of energy because replacing old cars with new takes decades and because industries and air travel will still need petroleum products.
Natural gas, however, may be the game-changer. Demand overseas has been steadily increasing and U.S. companies have been sending more gas to other countries. Exports of liquefied natural gas grew to more than 90 billion cubic meters in 2019, making the United States the third largest exporter of LNG behind Qatar and Australia,
according to the Energy Information Administration.
For a reality-check, note that EIA projects that energy demand globally will increase 30% by 2040. The United States can be a major and immediate part of the solution. The International Energy Agency foresees the U.S. supplying nearly three-fourths of the world’s net new demand for oil and especially natural gas.
There is no excuse for energy shortages. The biggest wild card is whether renewables will be able to meet the growing demand for energy. Environmentalists say that solar and wind will deal handily with energy consumption. The question is how long it will take for renewables to take up the slack, how much will it cost, and how high will oil and gas prices go in the meantime.
Dr. Robert W. Chase holds B.S., M.S., and Ph.D. degrees in Petroleum and Natural Gas Engineering from Penn State. He served as professor and chair of the Department of Petroleum Engineering and Geology at Marietta College from 1978 to 2015. He worked previously for Halliburton Services, Gulf Research and Development Company, and the Department of Energy and has consulted for numerous companies. You can reach him at firstname.lastname@example.org