The United States relies on foreign oil for nearly 65 percent of the oil we use — and the level of imports is rising. Energy independence, it is not.
Americans spend $400,000 every minute for imported oil. The cost of importing more than 8 million barrels of oil a day becomes even greater when we consider the military cost of protecting oil transported by tanker from the Middle East and other volatile regions.
Nonetheless, the demand for oil is projected to grow as the United States emerges from recession. The government projects that even accounting for gains in efficiency and an increase in the use of alternative fuels, the United States will require 2 million barrels more of oil per day in 2030, and 1 trillion cubic feet more natural gas every year.
For an economy that depends on energy reliability and wants greater energy independence, there's only one realistic solution: adopting government policies to boost production of America's oil and natural gas resources.
The government should allow oil and natural gas production on federal lands and offshore areas that have been off-limits, or where energy development is constrained by restrictive permitting.
These areas stretch from the Rocky Mountains and the Arctic National Wildlife Refuge to the Gulf of Mexico and the Atlantic and Pacific. Combined, these areas contain an estimated 102 billion barrels of oil and 635 trillion cubic feet of natural gas that could be recovered with today's technology — more than the proven energy reserves of most OPEC countries.
The history of energy development in the United States shows that once actual production begins, new discoveries are made and estimates of recoverable oil and gas rise. Case in point: companies conducting tests 175 miles off the coast of Louisiana, 30,000 feet below the surface, came up with potentially the largest American oil discovery in a generation. Experts say there could be as much as 15 billion barrels, doubling U.S. oil reserves.
Recently, drilling began from far off the Gulf coast, drawing oil from a wellhead nearly two miles below the water's surface, the deepest in the world. Remote-operated vehicles controlled by technicians at the surface do everything from welding to connecting pipelines in thousands of feet of water.
Credit goes to American innovation and technology. Despite some "peak oil" theorists who believe energy supplies are fast running out, we have seen steady upward revisions in U.S. recoverable hydrocarbon reserves as energy companies invent new ways to find and pump oil and natural gas.
The industry has become remarkably efficient. A technique that combines hydraulic fracturing and horizontal drilling is being used to reach huge amounts of natural gas locked in shale rock. Experts believe that shale gas could meet the nation's natural gas needs for 100 years or more. In fact, shale gas now accounts for 40 percent of domestic gas production, reversing years of decline.
The success with new drilling technology has made western oil shale, another vast energy resource, much more appealing. Oil shale in western states is estimated to hold 800 billion barrels of oil, double the proven reserves of Saudi Arabia, though new techniques still need to be developed to bring down the drilling costs.
Developing oil and gas resources in the United States, modernizing existing infrastructure and improving efficiency will require not only fiscal stability but policy stability as well.
If ever there was a time for Congress to reject tax increases on oil and gas companies, it is now. Energy development in untapped government areas could generate more than $1.7 trillion in government revenue, create tens of thousands of jobs, and help reduce our nation's dependence on foreign oil. The bottom line is that encouraging increased domestic oil and gas production can be a cost-effective, win-win approach to achieving energy independence.
Perry is a professor of economics at the Flint campus of the University of Michigan and a visiting economist at the American Enterprise Institute (www.aei.org); e-mail: firstname.lastname@example.org.