Energy for an Enduring American Transformation

Mark Green
Posted June 25, 2015

Let’s get into some of the detail in the new Wood Mackenzie study that was released this week, starting with the implications for domestic energy supply, found in two vastly different energy paths that U.S. policymakers could take. As the study details, the path we choose will affect energy production, job creation, the economy and the lives of individual Americans.

For context, recall that Wood Mackenzie’s study compared two energy policy paths – one that embraces pro-development, and one that’s characterized by regulatory constraints. Certainly, the constrained path actually would just continue a number of the policies the current administration is advancing. A chart comparing the two paths:

Here’s the crux of the way the study defines a pro-development policy approach:

According to the study, the pro-development approach to energy policy would result in the production of an additional 8 million barrels of oil equivalent per day (MMboed) by 2035 over baseline output. The path of regulatory constraint would actually reduce U.S. domestic output by 3.4 MMboed below the baseline by 2035. A chart from the study provides additional detail:

As you can see, U.S. domestic energy production is projected to grow in all scenarios from current output of 25 MMboed to 36.5 MMboed in 2035 – growth that’s reflected in the chart above by the dark blue line, the middle of three lines. Above it, the light blue line shows estimated growth if the pro-development policy path is taken, rising to 44.5 MMboed in 2035. Below those two, the gray line shows output growing below the baseline, if the energy approach typified by regulatory constraint is followed. The disparity between the two growth lines is 11.4 MMboed, which highlights the significance of America’s energy choice.

Those 11.4 million barrels represent key differences for the United States. It’s the difference between America as a global energy superpower and an America that self-limits its options and also its world influence. It’s the difference between strengthened energy security and a key missed opportunity to control more of our energy future. That production difference also is critical in terms of job creation, economic growth and benefits to individual household, which we’ll detail in future posts.

If you look at the separate production estimates for the two policy paths for oil, natural gas and natural gas liquids (as the study does), future oil output would be most affected by the policy choice at hand. The chart at left shows that under the pro-development approach (light blue, top line), oil production would increase by 5.7 MMboed by 2035 over baseline growth (dark blue, middle line).

Regulatory constraints (gray line), according to the study, would result in 2035 oil production relatively unchanged from current levels (and about 1 MMboed) below the baseline projection). Given what we’ve seen in future demands for energy from a number of organizations, the notion of relatively flat U.S. oil production over the next two decades should give policymakers pause.

The takeaway point from the study on U.S. energy supply is that the United States has vast energy potential that, depending on the policy path chosen, with either be harnessed for the good of the country and its citizens or basically squandered. America has the energy, technology and know-how to take more control over its energy future while affirming its status as a global energy superpower. But realizing that potential will take forward-looking, affirmative decisions right now to foster safe and responsible development for today and tomorrow. API President and CEO Jack Gerard:

“… our nation’s rise to become a global leader in energy production – what we call the American moment – was the result of innovations in hydraulic fracturing, horizontal drilling and state of the art refineries, and encouraged by America’s unique private property and free market system ... Ultimately, our nation’s energy policies should set a course that transforms this American moment of energy abundance and domestic energy security into a lasting era of domestic energy security, economic prosperity and global energy leadership.”