Illinois Oil Has Played Big Role in Securing American Freedom and Prosperity
As America celebrates this Fourth of July weekend, it is important to remember what has made the enduring freedoms and prosperity we all enjoy possible.
It is widely understood the United States and the free world as we know it would be a much worse place if not for the nearly incomprehensible efforts and sacrifice of the Greatest Generation during World War II. But less understood is the fact that their valiant struggle to defeat the Axis Powers was literally fueled by abundant American oil – much of it produced right here in Illinois.
Six out of seven barrels of oil consumed by the Allied Forces during WWII was produced in the United States. Oil was absolutely essential to the war effort, as it was needed to fuel tanks, military vehicles and aircraft. It was also used to make TNT, synthetic rubber for tires, runways and lubricant for guns, just to name a few of its myriad of applications. Historians widely agree that it was largely because Germany and Japan were both severely lacking in domestic petroleum resources that their war machine literally ground to a halt. The United States, in contrast, produced half of the world’s oil during this time, providing an undeniable advantage for the Allied Forces. A prominent German marshal even listed his country's oil deficiencies as one of the three primary reasons they lost the war.
Illinois was a top-10 oil producing state during this time, totaling 470 million barrels of production from 1941 to 1945, six percent of overall U.S. production. The Land of Lincoln was also home to the critical “Big Inch” pipeline that delivered more than half of the oil used by the United States during World War II. The pipeline, which replaced ocean tankers that had become easy targets for German U-boats, terminated in Norris City, where oil was stored in more than a dozen 80,000-barrel storage tanks and eventually distributed to numerous east coast refineries. The “Big Inch” allowed for the safe and timely transportation of oil for the war effort, helping turn the tide to the Allied Forces’ favor.
Although much has changed in the decades since World War II, one thing has remained the same – the world still runs on oil and will continue to for many decades to come. Though the “energy transition” narrative is in vogue and policies are deliberately being implemented to decrease domestic oil production and stop pipeline projects, access to our considerable oil and natural gas reserves remains essential to ensuring our national security. That is why just a year after the United States became a net petroleum exporter on an annual basis for the first time on record, our adversaries in Russia, China and the Middle East are no doubt looking on with delight as pipeline construction projects continue to be cancelled or delayed and our oil imports have spiked dramatically so far this year.
Pipelines remain the safest, most efficient and least carbon-intensive method of transporting crude oil, but given the recent cancellation of the Keystone XL pipeline and potential shutdown of the Dakota Access Pipeline, it seems possible that if the “Big Inch” pipeline were proposed today, it would never be constructed. Likewise, if military threats similar to those posed by Germany and Russia in the 1940s emerged today, it’s difficult to imagine widespread support for the increased domestic oil production our military would need to counter it.
Fortunately, such thinking was not prevalent during World War II – and the world is much better off for it. But the fact that such might not be the case today is a sobering reminder of just how fragile the freedom and prosperity we’ll be celebrating this Independence Day weekend really is. History teaches us that America needs American oil. That said, we should produce as much of the oil we need here in Illinois and throughout the United States as possible to ensure our way of life is protected.
IEA Report Recommendations Would Destroy US Energy Security if Implemented
State-owned national oil companies already produce nearly three-quarters of the world’s oil and control 90 percent of its proven reserves. The only thing keeping these true “Big Oil” giants from completely controlling the world’s hydrocarbon supply are the privately-owned, independent oil companies that dominate the Illinois Basin and the United States as a whole.
It is with that fact in mind that the recommendations of a recent International Energy Agency (IEA) report pose such a threat to the United States’ hard-won, decades-long struggle to achieve energy independence.
The IEA calls for no new investments in oil and gas-related projects in order to meet net-zero greenhouse gas emissions by 2050. It is a recommendation that will no doubt be completely ignored by the Saudi Aramcos, Rosnefts (Russia) and National Iranian Oil Corporations of the world, while emboldening “Keep It In the Ground” calls for divestment from independent oil and gas producers and publicly traded multi-national companies based here in the United States.
That is terrible news for the energy security of the United States, namely because even the IEA acknowledges the world is going to need a lot of oil for many decades to come. As Cyril Widdershoven writes for Oilprice.com,“A fully renewable, sustainable, and stable world before 2050 is not something that can be achieved without oil and gas for both petrochemicals and energy” and “[w]ithout independents, all power will fall into the hands of national producers.”
The IEA even acknowledges that if its recommendations are acted on, the OPEC cartel’s share of global oil supply will jump from 37 percent to 52 percent in 2050, an all-time high. This would leave the United States heavily reliant on hostile foreign sources for both its traditional and renewable energy needs (China enjoys a virtual monopoly on critical mineral supply chains needed for alternative energy infrastructure).
It’s often been said that doing the same thing over and over again and expecting different results is the definition of insanity. But it’s even crazier to voluntarily recreate a foreign energy-reliance scenario that has had dire consequences in the past and expect a positive outcome this time around.
It was just 16 years ago that nearly half of the record 10.1 million barrels a day of crude oil the U.S. imported came from OPEC cartel.
We were under the cartel’s thumb for decades, indirectly or directly resulting in numerous bloody foreign entanglements and infamous long lines at the pumps. With OPEC’s energy-driven geopolitical leverage over the United States as a prime motivator, eight different U.S. presidents strived for energy independence. The goal was finally achieved last year, when we became a net petroleum exporter for the first time on record and saw our crude oil imports from OPEC fall to their lowest levels since 1973. Remarkably, at the same time the United States achieved energy independence, it also managed to lead the world in carbon dioxide emissions (CO2) reductions.
Global CO2 reductions are at the core of the IEA’s recommendations. But the fact remains that the U.S. oil demand will remain strong for decades and the most realistic way to continue the historic decoupling trends of economic growth and emissions reductions is producing as much oil and natural gas here as possible.
Returning to the days of importing a large share of the oil we use from OPEC and other state-owned sources will not only weaken our geopolitical standing, but result in higher emissions, considering state-owned oil companies are subject to far more relaxed environmental standards than companies here in the U.S.
Soon after the IEA’s report was released, energy companies in Asia, Japan and the Philippines rejected the organization’s conclusion that stopping new oil and gas investment and ceding market share to OPEC is the ideal path to net-zero emissions. The United States should do the same. Not only are the IEA’s recommendations unrealistic, they would further embolden true “Big Oil” state-owned giants who would love nothing more than to have the United States once again under their collective thumbs.
Why Oil & Gas Workers Aren’t Too Keen on the ‘Just Transition’ Narrative
With their industry under assault, oil and gas workers are being assured they can simply transition to renewable energy jobs. John Kerry even recently quipped that oil and gas workers “can be the people who go to work to make solar panels.” Easy peasy, apparently.
So why is this “just transition” narrative being met with deep skepticism and even anger from oil and gas workers? Because the notion that a simple “transition” to jobs that typically pay less – or don’t even exist at all – is as misguided as the belief we can quickly pivot to 100 percent renewable energy.
A recent Energy Information Administration report provides a reality-check, finding the United States will likely continue to rely on oil and natural gas for just under 70 percent of its energy needs through at least 2050. Despite all the talk of the “end of oil” the EIA forecasts that “petroleum remains the most-consumed fuel in the United States” for decades. Department of the Interior Secretary Deb Haaland recently echoed the report’s findings, testifying, “There’s no question that fossil energy does and will continue to play a major role in America for years to come.”
So contrary to the “just transition” narrative, a robust U.S. oil and gas industry workforce will be needed for years to come – including Illinois’ proud oil and gas workforce.
Though most folks probably don’t think of Illinois as a major oil and gas industry state, a recent Texas Independent Producers & Royalty Owners Association (TIPRO) report serves as a reminder that the Land of Lincoln is home to four refineries, the second-largest crude oil storage facility in the country and an oil production industry that dates back more than a century. TIPRO finds the Illinois oil and gas industry generated $22 billion in economic activity last year, three percent of the state’s overall economy. The report also finds there were not only 16,000-plus oil and gas jobs in Illinois last year – 10th most in the country – but that those jobs paid an average salary of more than $104,000, 65 percent higher than the private sector average.
No wonder Illinois oil and gas workers aren’t clamoring to “transition” to renewable energy industry jobs that pay less and are far more temporary in nature. As Politico reported this week, a new report by the National Association of State Energy Officials (NASEO), the Energy Futures Initiative, and BW Research Partnership finds that, “Workers in the greener side of the energy industry earn significantly less than those who extract fossil fuels and run power plants…”
The report finds that U.S. oil industry workers earn a median wage of $26.59 per hour, while oil workers in the mining/extraction sectors specifically have a median wage of $37.67 per hour. The median wage for wind and solar industry workers is $25.95 per hour and $24.48 per hour, respectively.
U.S. Bureau of Labor Statistics data show the most abundant U.S. “green” energy occupations – wind turbine technician and solar panel technician – pay $53,000 and $43,000 per year, respectively, both tens of thousands of dollars less than what the typical oil and gas worker makes. More than two-thirds of solar panel installation jobs are also temporary contract-based positions. These are just a few reasons why a recent survey of by a group of trade unions finds oil and gas jobs are viewed by skilled tradespeople as better paying and better long-term employment prospects than their renewable energy counterparts.
And when suggesting oil and gas workers can just go make solar panels, Kerry failed to mention that just one percent of solar panel manufacturing occurs in the United States. China (surprise, surprise) dominates the renewable infrastructure manufacturing industry and also has a near monopoly on the minerals that must be mined to manufacture renewable energy infrastructure. As Politico recently reported, “It’s a dirty truth. The U.S path to clean energy goes straight through China. … which controls a vast share of the minerals used in electric batteries, the cheap materials that make up solar panels and the guts of wind turbines.”
Common sense tells us we are going to need a lot of oil and gas for many years to come and that it’s imperative to produce as much of it here in the United States as possible. That cannot happen without the continued presence of a robust, experienced and skilled U.S. oil and gas industry workforce. That is why the “just transition” narrative is not only being met with skepticism by oil and gas workers, but a lot of pragmatic observers, in general.
Updated Report: Illinois Oil & Gas Reserves Generated $98.6M in Property Tax Revenue From 2007-2019
Note: This blog was updated with 2019 revenue on March 4, 2021.
Many Illinoisans may not be aware that the state’s active oil and natural gas production leases are assessed and taxed as real estate, similar to property taxes paid on a residential home. All of the revenue collected from this tax – known as an ad valorem tax – stays at the local level and goes directly to support the areas where oil is produced, including counties, villages, townships, cities, and – most importantly – local schools.
An IPRB review of the latest Illinois Department of Revenue (DOR) data shows that Illinois oil reserves generated $98.6 million in ad valorem tax revenue from 2007 to 2019, an average of more than $7.5 million per year. IPRB details this revenue in an updated annual report that can be downloaded here.
Typically, at least half of ad valorem property tax revenue is used to fund public education, while the remaining monies are used to fund various local public services. That fact noted, IPRB conservatively estimates that Illinois oil reserves generated at least $49.3 million in ad valorem tax revenue for schools in producing counties from 2007-2019. This revenue is all the more significant considering Illinois public schools were woefully underfunded by the state during this time frame, placing even more burden at the local level.
Ad valorem tax revenue from Illinois oil production has a particularly significant impact in major producing counties. IDOR data show that ad valorem tax revenue in Illinois’ top-15 oil producing counties totaled $87.9 million from 2007-2018, an average of more than $6.7 million per year.
IPRB conservatively estimates that at least $43.9 million of that revenue went to public schools in those top-15 producing counties.
It is important to note that many of these counties have relatively small populations and are relatively poor compared to many other state counties and the state as a whole. In fact, all but one of Illinois’ top oil producing counties (Crawford) have poverty rates that are higher than the national average – adding even more significance to the ad valorem tax revenue generated by oil and natural gas reserves in these counties. Just two percent of Illinois’ overall population resides in these top-15 producing counties, which are responsible for 90 percent of Illinois oil production.
Here are county-level breakdowns for Illinois’ top-15 producing counties featured in IPRB’s report:
- White County
- Marion County
- Crawford County
- Lawrence County
- Fayette County
- Wabash County
- Wayne County
- Clay County
- Wayne County
- Franklin County
- Richland County
- Clark County
- Jasper County
- Hamilton County
- Gallatin County
- Jefferson County
It is important to understand that these taxes are based on estimates of oil and gas reserves remaining in the ground, not oil and natural gas produced. The annual ad valorem tax bill that operators and royalty owners receive is also based on data that is over two years old. For example, ad valorem taxes paid in 2017 were based on a 2016 assessment of active leases that is calculated using 2015 production totals. There are also reductions for leases based upon lease age, secondary recovery methods used and production.
As complicated as the ad valorem tax calculation system may be, it is clear that these taxes are generating significant revenues in the communities where they operate, specifically for local schools.
Illinois Oil Production Totaled 7.51 Million Barrels in 2020
Illinois crude oil production totaled 7,513,835 barrels in 2020, according to data compiled by the Illinois Petroleum Resources Board (IPRB) that is based on first-purchaser reports. Click here to view IPRB’s annual Illinois oil production report.
The state’s 2020 oil production was 8.9 percent below 2019 levels. A similar production drop was observed throughout the United States, as the COVID-19 pandemic-induced oil demand and price shock led to national production dropping 8.1 percent, from a record 12.3 million barrels per day in 2019 to 11.3 million barrels per day in 2020.
Though production was down significantly overall in Illinois last year, monthly production levels trended upward in the second half of the year as oil prices recovered modestly following the worst of the demand and oil price shock in the spring.
White County – by far the state’s top-producing county – actually saw strong production growth in 2020 despite the pandemic. White County oil production totaled 2,206,100 barrels in 2020 – a 7.6 percent increase from 2019 levels. White County has now topped 2 million barrels of production two years in a row and accounted it for just under 30 percent of the state’s production last year. White County’s annual production has more than doubled from levels seen just a decade ago.
The state’s top-15 producing counties – White, Marion, Crawford, Lawrence, Fayette, Wabash, Clay, Wayne, Franklin, Clark, Hamilton, Richland, Jasper, Gallatin and Jefferson – collectively produced 91 percent of the state’s oil in 2020. All 15 of those counties – as well as Edwards, Brown and Effingham counties – have recently passed Resolutions of Support for the Illinois oil production industry.
Report: Illinois Oil & Gas Industry Represented 3% of State’s Economy in 2020
Most folks probably don’t think of Illinois as a major oil and natural gas industry state. But the recently released Texas Independent Producers and Royalty Owners Association (TIPRO) 2021 State of Energy Report shows that perception doesn’t always align with reality.
Even coming off possibly the toughest year the industry has ever faced, the report finds that the Illinois oil and natural gas industry – including the upstream, midstream and downstream sectors – was responsible for $22 billion in Gross Regional Product (GRP) in 2020, representing three percent of the Land of Lincoln’s overall economy. The following Illinois fact sheet was featured in the report.
According to the report, the Land of Lincoln had 16,374 direct oil and natural gas industry jobs in 2020, placing it among the top-10 states in direct oil and natural gas industry employment. The report also shows Illinois oil and natural gas industry jobs pay an average of $104,840 a year – 65 percent higher than the private sector average. These are just a few of the many reasons Gov. JB Pritzker designated the oil and natural gas industry as “essential” when COVID-19 pandemic restrictions were first implemented. Illinoisans not only rely on the essential products and services our regional oil and natural gas industry provides, the industry itself is a major economic engine and employer in the state.
The TIPRO report tallies 1,741 Illinois upstream oil and natural gas industry jobs in 2020, a figure that does not include hundreds of non-payroll independent contractors that are not captured in the U.S. Bureau of Labor Statistics data used as the primary employment source of the report. Using the most recent U.S. Census Bureau Non-Employer Statistics Report, IPRB conservatively estimates more than 3,200 were directly employed in the Illinois “upstream” oil production industry last year. The upstream Illinois oil and gas industry also indirectly supports thousands of other jobs. The Economic Policy Institute estimates that the oil and natural gas extraction industry has one of the highest indirect job employment multipliers, where one direct job leads to an additional 5.43 indirect jobs.
Not surprisingly, the TIPRO report finds that Illinois upstream oil and natural gas production industry jobs were down 19 percent last year. The oil price demand and price shock created by the COVID-19 pandemic had an even bigger negative impact nationally, as upstream jobs were down 24 percent across the country. There were 359,410 upstream jobs (not including non-payroll independent contractors) in the U.S. last year, down 112,348 jobs compared to 2019. Oil and gas support and service industry jobs were hit particularly hard, down 77,393 jobs from 2019 (192,163).
Despite an undeniably tough year, direct U.S. oil and natural gas industry jobs still totaled 902,223 in in 2020, paying 86 percent higher than the private sector average ($113,601).
On the state level, the report also shows that there were 342 upstream oil and natural gas businesses in Illinois in 2020 and that 25 percent of the state’s oil and natural gas industry workforce is 55 or older, indicating there will be strong job demand going forward as a large share of the state’s workforce is at or near retirement age.
Check out IPRB’s recently updated Illinois oil and natural gas industry “By the Numbers” fact sheet for a snapshot of the importance of the industry in the state.
Draft DOE Study Indicates Illinois Basin Oil Production Methane Emissions Are Negligible
Preliminary results from a long-awaited U.S. Department of Energy marginal well methane emissions study have been released, and they confirm what even the Obama-era EPA acknowledged back in 2015: methane emissions from marginal production sites are “inherently low.”
The draft report – which was commissioned to fill a gaping data gap for wells that produce 15 barrels of less of oil per day or 90,000 cubic feet or less of natural gas per day – includes full results from first field campaign of the study, which included Illinois Basin marginal oil production sites. The Illinois Basin portion of the study is identified on the right side of the area labeled “5” on the following map featured in the draft report (view two-page summary here).
Among the most notable takeaways from that field campaign that included the Illinois Basin were:
- 75 percent of the 87 oil sites evaluated had no detected emissions at all
- 90 percent of observed emissions were less than 13 standard cubic feet per hour
- 90 percent of emissions detected were from 12 percent of the sites
- Two sites – an oil well that had a sucker rod packing issue on its pump jack (137 scfh) and a natural gas well with an open hole in the wellhead casing (156 scfh) – accounted for 40 percent of the overall emissions detected
It should be emphasized that the results are preliminary and the final report, which has been delayed by the COVID-19 pandemic, is slated to be released in September 2021. However, the Illinois Basin field study portion of the report is complete, with the data presented in the draft version of the report providing the most definitive methane emissions profile of the Illinois Basin to date. And that profile shows methane emissions from the Illinois Basin are negligible. The following graphic summarizes the oil production site findings from the field campaign that included the Illinois Basin.
With regard to the field campaign that included the Illinois Basin specifically, the report notes:
“Overall, emission rate measurements from Field Campaign 1 [which included the Illinois Basin] exhibit the long-tail behavior commonly observed in air emissions studies (see Figures 6 and 7 in Section 3.6). Approximately 90% of the observed emissions were less than 13 standard cubic feet per hour (scfh), and 95% of the observed emissions were less than 25 scfh. The top 10% of emission sources contributed 72% of the total emissions observed…”
Why It Matters
The Obama administration eliminated the marginal well exemption from its 2016 methane rule despite the Obama-era EPA acknowledging in 2015 that methane emissions at marginal wells are likely “inherently low.” In absence of significant marginal well emissions data, the Obama-era EPA in 2016 began extrapolating reported leakage rates from larger facilities onto smaller facilities, basing this methodology on the flawed notion that they have similar leakage rates. Put another way, the decision to eliminate the marginal well exemption was justified largely by assumed proportion of total production emitted from marginal wells rather than actual total emissions.
The Obama-era decision to eliminate the marginal well exemption from the methane rule was also made despite the fact that there was no significant research on marginal wells that was sufficient enough to justify the need for doing away with the exemption. That is the primary reason the DOE/GSI Environmental marginal well methane study was commissioned during the Trump administration. As the draft version of the DOE report notes:
“Seventeen peer-reviewed papers published between 2010 and 2019 include evaluations of site-level emission measurements or estimates from approximately 9,000 production sites including approximately 25,000 wells spread across 13 major basins. Of this population, approximately 3,500 of the sites may be considered marginal and predominantly represent natural gas production, with very little representation of oil production.”
The preliminary results of the study show that the environmental benefit of marginal wells being subject to the methane rule would likely outweigh the significant financial costs the elimination of the exemption would have posed on small operators.
As the Obama-era EPA acknowledged in 2015, “many [marginal] well sites are owned and operated by small businesses.” The latter is especially true in the Illinois Basin, where there isn’t a single major publicly traded company with production operations and more than 90 percent of the state’s oil wells are marginal producers, compared to 70 percent of wells nationwide. In fact, a vast majority of Illinois oil wells are actually “stripper wells,” which are wells producing 10 barrels or less per day.
The Independent Petroleum Association of America has estimated that costs associated with purchasing equipment and needed to comply with the Obama-era methane rule would result in a total average price tag more than $78,000 per operator.
As the DOE report shows, such costs would not only prove incredibly burdensome for small producers already dealing with low commodity prices, the elimination of the marginal well exemption – which was recently re-instated by the Trump administration – would provide no climate benefit. Fortunately, the DOE report will better inform the marginal well methane emission debate moving forward.
UPDATE: U.S. Led World in CO2 Reductions For 10th Time This Century Last Year
UPDATE: Dec. 3, 2020
The U.S. Energy Information Administration (EIA) has projected U.S. energy-related carbon dioxide (CO2) emissions will decline 10 percent this year, putting the United States on pace to lead the world in annual CO2 reductions for the 11th time this century.
Though the unfortunate economic disruption brought on by the coronavirus pandemic is likely responsible for most of the reductions this year, the reductions achieved over the past 15 years have largely been attributable to fuel switching to natural gas in the power sector.
Not only has increased natural gas use been the primary reason the United States leads the world in CO2 reductions this century, a recent Bloomberg BNEF report notes that the U.S. is now on track to meet its Paris climate accord reduction pledges, as the following IPRB graphic illustrates.
Original Post: July 2, 2020
BP’s recently released Statistical Review of World Energy 2020 shows that in 2019 the United States led all nations in carbon dioxide (CO2) emissions reductions for the 10th time this century. U.S. CO2 emissions fell 152 million metric tons in 2019, three percent below 2018 levels, according to BP.
This continues a trend that has been observed more often than not since since the turn of the century. In fact, BP data show that the U.S. has reduced CO2 emissions a world-leading 755 million metric tons since 2000, outpacing the next four leading nations combined.
Experts agree that fuel-shifting to clean-burning natural gas from higher-emitting fuels in the power sector is the primary reason the U.S. has achieved these reductions over the past decade-plus. For example, the International Energy Agency (IEA) recently noted:
“The United States saw the largest decline in energy-related CO2 emissions in 2019 on a country basis – a fall of 140 Mt, or 2.9%, to 4.8 Gt. US emissions are now down almost 1 Gt from their peak in the year 2000, the largest absolute decline by any country over that period. A 15% reduction in the use of coal for power generation underpinned the decline in overall US emissions in 2019. Coal-fired power plants faced even stronger competition from natural gas-fired generation, with benchmark gas prices an average of 45% lower than 2018 levels. As a result, gas increased its share in electricity generation to a record high of 37%.”
U.S. Energy Information Administration (EIA) data show that from 2005 to 2018, a rapid shift to natural gas in the power sector reduced U.S. CO2 emissions 57 percent more than the emissions reductions realized through renewables, as the following Energy In Depth graphic shows.
However, despite the progress made by the United States and other nations that have achieved significant emissions reductions (four examples are listed in the graphic below) the BP report shows that overall global CO2 emissions increased 161 million metric tons in 2019.
This can be explained by another trend that has also been consistently observed in recent years. China’s CO2 emissions alone increased 319 million metric tons from 2018 to 2019, more than offsetting the United States’ declines.
So far this century, China’s emissions have increased by more than 6.4 billion metric tons, spiking at more than eight times the rate that U.S. emissions have declined over the same time-frame. Check out the following new IPRB infographic for perspective.
Considering China is already responsible for more than half of the world’s coal consumption and is ramping up coal consumption at the same time the U.S. and several other major countries are fuel-switching to clean-burning natural gas indicates these trends are unlikely to change any time soon. In fact, China has nearly as much new coal power generation in development as the United States had in operation last year, according to E&E News.
Due largely to the coronavirus pandemic – but also because of the continued trend of fuel-switching to natural gas and renewables – the EIA projects U.S. emissions will fall another 11 percent in 2020. The United States' world-leading CO2 reductions can largely be attributed to innovation in the oil and natural gas industry.
But climate change is a global issue, which is why it is important to understand the big picture when it comes to greenhouse gas emissions. Based on simply math, it is clear that even the most onerous climate policies imposed in the United States and throughout the world will be not enough to offset rapidly increasing emissions from China.
6 Things to Know About New Department of Energy Report on Importance of Oil and Natural Gas
Much has changed since the U.S. Department of Energy (DOE) released a 1999 report emphasizing the importance of oil and natural gas to the United States. But one thing has remained the same in the 21 years since: A general lack of knowledge about the prominent role of oil and natural gas in our country’s present and future prosperity remains.
It is with the latter reality in mind the DOE recently updated and re-released that report. Here are six things to know.
#1: The DOE Expects O&G’s Share of the US Energy Mix to Stay the Same Through 2040
The report notes that oil and natural gas’ share of the U.S. energy mix is currently near 70 percent, as the following graphic illustrates.
And despite all the hoopla about the “green” energy transition, the DOE expects oil and gas’ share of the energy mix to remain at nearly 70 percent through at least 2040.
As the report notes:
“Even after accounting for the steady growth of renewables, according to the EIA, oil, natural gas, and natural gas liquids are projected to account for the majority – nearly 70 percent – of domestic energy consumption two decades from now.”
This completely debunks the “peak oil demand” narrative currently being pushed by “Keep It In the Ground” groups. For example, the Sierra Club recently published a piece headlined, “The End of Oil Is Near: The Pandemic May Send the Petroleum Industry to the Grave.” There are many reasons for the divide between the reality highlighted in the DOE report and the rhetoric pushed by the Sierra Club.
The next fact pulled from the DOE report is a prime example.
#2: Oil and Gas Are More Than Just Fuel
The DOE report emphasizes the fact that oil and natural gas are used for much more than combustible fuel for transportation, power generation and heating. Many Americans remain unaware that oil and natural gas liquids are essential feedstocks for countless products that make our high standard of living possible. From the report:
“Hydrocarbons like ethane are the core ingredient in plastics, and are essential to modern healthcare, agriculture, the automotive industry, construction products, consumer products, and even renewable energy. Ethane is a liquid hydrocarbon removed from natural gas during post-production processing. While a relatively small portion of liquid hydrocarbons (about seven percent) are used to produce non-energy products, these products’ omnipresence in our daily lives bears highlighting. We cannot live our 21st century lives without them.”
More than 6,000 everyday products are petroleum-based and 31 percent of U.S. petroleum use occurs outside of the transportation sector.
#3: Renewables Need Oil and Gas
Among the list of thousands of petroleum-based producers are components of renewable energy infrastructure. Petrochemicals are required to manufacture solar panels, wind turbines, batteries, thermal insulation and electric vehicles.
With those facts in mind, the DOE report notes that we would still need significant quantities of oil and natural gas to accomplish the titanic transition to 100 percent renewable electricity generation that so many “Keep It In the Ground” groups advocate for. As the report notes:
“Even efforts to reduce our reliance on fossil fuels still require that we use hydrocarbons – derived from oil and natural gas – to create and maintain the products and technologies that make these alternative energy sources reliable and economically possible.”
“Lightweight, durable plastics produced with oil and natural gas are used by most wind turbine and solar panel manufacturers.”
The report also emphasizes that because wind and solar are intermittent energy sources. backup natural gas power generation will remain necessary for the foreseeable future. From the report:
“While the share of power produced by renewable energy sources like solar and wind is expected to grow, these sources are ‘intermittent’ – wind energy fluctuates with the wind intensity and solar energy fluctuates with cloud cover and nighttime darkness – so there has to be a reliable, secure means to provide continuous electricity to consumers. The larger the contribution of renewables to the electric power grid, the bigger this challenge can be.”
“An effective solution is installation of fast-ramp-up natural gas power plants, which can be switched into the power generation system quickly whenever renewable generation slips. Such plants are capable of reaching full power outputs of hundreds of megawatts in less than 30 minutes and can be scaled back quickly when the wind picks up or the sun comes out. This role for natural gas will continue until low-cost, environmentally sustainable, large-scale power grid batteries capable of storing solar or wind-generated energy and discharging it instantaneously are available.”
#4: Oil and Gas Are Essential to Modern Healthcare and Agriculture
Some might argue that many of the petroleum products and modern advances made possible by oil and natural gas emphasized above might be viewed as superficial luxury items that we can live without if need be. But the report highlights two examples of absolutely essential industries that have been greatly enhanced by oil and natural gas: healthcare and agriculture.
The report notes that oil and natural gas have revolutionized modern agriculture, helping feed an exploding global population. In addition to fueling modern agricultural machinery, the report notes:
“Natural gas is also a key ingredient for chemical fertilizers, helping increase crop production and yield per acre planted, and powering many important operations on the farm like crop drying.”
The report notes that the ongoing pandemic has placed emphasis on the importance of fundamental healthcare and the role of oil and natural gas in it.
“The global economic disruption associated with the 2020 COVID-19 pandemic has highlighted the complicated relationship between our energy supply, society’s economic strength, and humanity’s physical health. Supplies of oil and natural gas are critical to all of the sectors of society involved in fighting the virus – fueling first responder ambulances, powering hospitals, and providing raw materials for lifesaving drugs and the personal protective equipment needed by caregivers.”
It is largely because of advances in healthcare and agriculture – both made possible by oil and natural gas – that extreme poverty recently dropped below 10 percent for the first time in recorded history. Access to food, healthcare and modern energy have made life easier, and they are all made possible by oil and natural gas.
#5: Increased Oil and Gas Production Has Made the United States Energy Independent
The report notes that the United States has reversed its position from that of energy dependence to energy independence thanks to increased oil and natural gas production over the past decade-plus.
“Dramatic increases in domestic oil and natural gas production enabled the United States to move from being an energy importer to being a net energy exporter. This shift means we are no longer dependent on other countries to meet our domestic energy needs. As a growing supplier of natural gas to global markets, the United States is now in a position to help its allies worldwide power their economies.”
The United States was the world’s largest oil importer in 2008. As oil and natural gas liquids production increased 148 percent from 2007 to 2019, net petroleum imports decreased 95 percent. Just 13 years removed from being the world’s biggest energy importer, America is now on a trajectory to completely wipe out an energy trade deficit that peaked at $321 billion in 2011. Much to the chagrin of the hostile nations we once relied heavily on to meet our energy needs, what was once a glaring national weakness is now a strength, and our geopolitical position is as strong as its been in decades as a result.
#6: The Oil and Gas Industry Provides Hundreds of Thousands of Well-Paying Jobs and Boosts the Economy
The DOE report notes that the U.S. oil and natural gas industry provides quantity and quality when it comes to jobs. From the report:
“The domestic oil and natural gas extraction industry supports 896,000 jobs (as of the end of 2019), including both direct and indirect jobs. This consists of 158,000 direct jobs and an estimated 738,000 indirect jobs, such as service and supply jobs, as well as induced jobs. The Economic Policy Institute reports that the oil and natural gas extraction industry has one of the highest indirect job employment multipliers, where one direct job leads to an additional 5.43 indirect jobs.
“Last year, the average direct job in the oil and natural gas extraction industry had an annual average wage of $112,000, more than double the annual average wage of $51,000 for the private sector. … Non-supervisory direct jobs average annual wage of $88,000, about 70 percent higher than the average private sector wage.”
The loss of these jobs as a result of “Keep It In the Ground” policies would prove devastating to our economy and would only lead to increased imports from oftentimes hostile nations to meet our energy needs.
The report also notes that strong U.S. oil and natural gas production in recent years has saved Americans billions by keeping energy costs affordable. From the report:
“The lower oil and natural gas prices resulting from increased domestic oil and natural gas production provided $203 billion annual savings to U.S. consumers – equal to $2,500 per year for a family of four.”
Conclusion
As the DOE report notes, “… A seamless transition to a lower carbon future will depend on a steady supply of hydrocarbons to minimize economic disruption.” This is a fact that too few Americans are aware of. As the report clearly illustrates, it remains essential for the United States to produce as much as the oil and natural gas here as possible moving forward.
5 Positive US Oil and Natural Gas Facts Everyone Should Know
The U.S. oil and natural gas industry almost always finds itself on the defensive, responding to relentless attacks from the “Keep It In the Ground” movement. Largely under-emphasized or taken for granted – even by oil and natural gas industry proponents – are the myriad of undeniable positives that oil and natural gas bring to society.
With calls to “Keep It In The Ground” gaining more and more mainstream traction, it is more important than ever to remind folks that oil and natural gas are essential to modern life, with benefits that far outweigh its negatives. Here are five examples that every oil and natural gas industry proponent should know and proudly share.
#1: Oil and Gas Has Improved Both Quality and Length of Life
Access to affordable, reliable energy correlates directly improved living standards and longer life expectancy. That explains why the average life expectancy has doubled at the same time oil and natural as consumption has skyrocketed over the past century-plus. And as more and more of the world has gained access to reliable energy, the percentage of the global population living in extreme poverty has plummeted from more than 80 percent to below 10 percent for the first time in human history.
CLICK TO ENLARGE
Those throughout the world who are currently living in extreme poverty have one thing in common – they lack access to the modern energy the rest of the world enjoys and takes for granted. Put another way, energy poverty is extreme poverty. Fossil fuels supply more than 80 percent of the world’s energy and have greatly improve quality of life by providing heating and cooling to reduce the impacts of extreme weather, fuel and fertilizer for modern agriculture to nourish an exploding population, electricity and transportation to revolutionize efficiency and productivity, and tools that make the miracle of modern healthcare possible (more on that below).
#2: Oil and Gas Are Essential to Quality, Modern Healthcare
A 2011 peer-reviewed study published in the American Journal of Public Health notes, “Petroleum is used widely in health care – primarily as a transport fuel and feedstock for pharmaceuticals, plastics and medical supplies – and few substitutes for it are available.”
Indeed, oil and natural gas are absolutely essential to modern healthcare, literally helping our medical professionals save lives. It is estimated the average emergency room has 90 products derived from petroleum and natural gas. It is also estimated that 80 to 90 percent of pharmaceuticals are made of petroleum.
A wide range of medical devices – ranging from pacemakers, heart valves, monitors, respirators and 3.5 billion face masks used by medical professionals – are petroleum-based or include critical components that are derived from petroleum.
CLICK TO ENLARGE
#3: Strong US Oil and Gas Production Makes Us More Secure
Almost 70 percent of U.S. energy comes from oil and natural gas and a vast majority of Americans agree that producing oil and gas here in the United States is far more ideal than importing it from oftentimes hostile nations.
Fortunately, the United States is closer to long-sought energy independence than was ever dreamed possible. Department of Energy data show that since 2007, net crude oil and petroleum product imports have declined 95 percent at the same time domestic crude oil and liquids production have increased 148 percent. Despite the ongoing pandemic, the United States is on pace to be an net petroleum exporter on an annual basis in 2020 for the first time since 1949.
Just 13 years removed from being the world’s biggest energy importer, America is now on a trajectory to completely wipe out an energy trade deficit that peaked at $321 billion in 2011. Much to the chagrin of the hostile nations we once relied heavily on to meet our energy needs, what was once a glaring national weakness is now a strength, and our geopolitical position is as strong as its been in decades as a result.
Considering carbon dioxide emissions have declined 15 percent during this timespan, the energy security benefits of strong U.S. oil and natural gas production are an undeniable net positive for our country.
CLICK TO ENLARGE
#4: Strong US Oil and Gas Production Bolsters Our Economy
Rising US oil and natural gas production has historically correlated directly with economic growth in the country – with the past decade-plus being a prime example.
As oil and natural gas production skyrocketed in the United States over the past decade-plus, the U.S. enjoyed an unprecedented 11 consecutive years of gross domestic product (GDP) growth prior to the COVID-19 pandemic. The oil and natural gas boom has been credited for 10 percent of GDP growth since the Great Recession.
This economic prosperity can largely be explained by the fact that strong domestic oil and natural gas production dramatically reduces foreign imports, keeping billions of dollars here in our own economy rather than exporting them oversees. Our newfound energy bounty has also proven the equivalent of a massive tax cut, lowering energy costs dramatically. In fact, the Department of Energy reported in 2018 that average U.S. energy costs fell 34 percent from 2008 to 2016, dropping from record-high levels to a “record-low energy expenditure share” in less than a decade.
The U.S. oil and natural gas industry also continues to support more than 10 million jobs across the United States, with direct oil and natural gas industry jobs paying an average salary double the private sector average ($112,712 per year).
Energy is the one thing that all Americans use. And with that fundamental reality in mind, we have literally been able to drill our way to lower energy prices and economic prosperity over the past decade-plus, all while reducing greenhouse gas emissions.
CLICK TO ENLARGE
#5: The US Lead the World In CO2 Reductions Thanks Largely to Natural Gas
The United States has reduced carbon dioxide emissions more than any other country this century. And although it may surprise casual observers, experts agree that the primary reason for these emission declines is fuel-switching to clean-burning natural gas, which has been made possible by industry innovation. That’s right: the same technologies that have allowed us to emerge as the leading oil and natural gas producer in the world are also largely responsible for our status as the world leader in greenhouse gas emission reductions. The decoupling trend is unprecedented and shows that we don’t have to choose between the economy and environment.
The emissions reductions have been driven by fuel-switching in the electricity generation sector, with the Energy Information Administration estimating that natural gas is actually responsible for 58 percent more power sector CO2 emissions reductions than renewables and other non-carbon electricity generation sources.
CLICK TO ENLARGE
Conclusion
Illinois Gov. JB Pritzker recently designated the oil and natural gas industry as “essential,” echoing the sentiment of governors throughout the country. As the above five examples illustrate, Pritzker’s designation was certainly justified. Oil and natural gas provide clear positive net benefits to society, improving quality and length of life by enhancing modern healthcare and fueling economic prosperity. Strong U.S. oil and natural gas production also greatly reducing our reliance on hostile foreign nations for our energy needs and has played a large roll in allowing us to reduce greenhouse gas emissions.
These are just a few examples of why the “Keep It In the Ground” movement’s stated goal of destroying this essential industry is a threat to our nation’s public health, economy and overall security.