Energy's Link to Competitiveness and Security
Facts, Choices, and Challenges
One of the most compelling realities about energy is its link to jobs, competitiveness, and security. Exploding demand abroad and development restrictions at home have put America at risk.
Energy’s Role in Economic Growth and Job Creation
The energy and power sector creates and sustains millionsof jobs—and the potential for good-paying jobs in the future is great.
According to the Bureau of Labor Statistics, the gross domestic product (GDP) of the energy industry itself (including electric and gas utilities, nuclear power generation, mining, and oil and gas extraction) was $352 billion in 2003, a 3.2% share of the national economy.
Public utilities employed around 600,000 workers in 2002. The process involved in finding, producing, transporting, and marketing oil and natural gas employs more than 1,620,000 people in the United States.
Additionally, one reputable study has concluded that the construction of 40 new nuclear power plants would add more than 600,000 good-paying jobs to the economy. Indeed, expansion of our energy infrastructure could reemploy manufacturing and construction workers who have lost jobs due to restructuring in these sectors.
The impact of energy on jobs, business, and the economy extends far beyond the energy sector itself. Increases in prices mean that consumers have less to spend on other goods and services. Higher energy costs result in lower returns on capital investment, making each worker less productive and adversely affecting wages. Corporate decisions on where to locate, expand, and create jobs depend significantly on the reliability and affordability of fuel and power. Energy imports also substantially expand the U.S. trade deficit.
By one estimate, on average, every time oil prices go up 10%, 150,000 Americans lose their jobs. The impact of potential supply disruptions—as the result of terrorism, weather, global competition for resources, or bad policy decisions— would be even more devastating to our economy, mobility, and even our ability to defend the nation.
Growing Demand on a Global Scale
Securing our energy supply, and thus our economic competitiveness, is also under pressure from the demands of other nations. Worldwide demand for fuel and power will expand much faster than our own. The Energy Information Administration predicts growth of more than 70% in global energy consumption between 2003 and 2030.
Americans will feel the impact of this growing demand in prices, availability, geopolitics, and vulnerability to security threats, especially if we continue to heavily restrict energy development here at home.
Burgeoning global energy consumption, most of which will come from fossil fuels, also means that efforts to address environmental and climate change concerns will have little or no effect without worldwide participation.
The rapidly expanding economies of China and India are becoming massive consumers of energy and will put serious pressure on global energy supplies, as well as on demand for energy-saving technologies.
China and India are powering much of their industrial development with impressive coal reserves. By some estimates, China is building an average of one coal-fired plant every week to power its booming economy. The two countries are each planning to build 20 new nuclear reactors by 2020. Even so, by 2050 both nations could be importing 70% to 80% of their energy needs.
By 2020, China will have 140 million private cars, more than the United States has at present.
Competitive economies need affordable and reliable energy. Our global competitors are embracing this reality. We can ill afford to ignore it.
Restrictions on Domestic Production
As the competition for resources grows, and as security concerns over imported oil mount, common sense might dictate that we act to prudently revise restrictions on domestic energy development. Nevertheless, despite thousands of political speeches calling for “energy independence,” little progress has been made.
- Onshore federal lands are estimated to contain 187 trillion cubic feet of natural gas and 21 billion barrels of oil—enough natural gas to supply all of America’s households for 39 years and enough oil to supply 30 years’ worth of current imports from Saudi Arabia.
- The U.S. Geological Survey estimates that the 1002 Area of the Arctic National Wildlife Refuge (ANWR) alone contains the equivalent of about 20% of our domestic daily production.
- Undiscovered oil on federal lands off the coasts of the lower 48 states alone could replace current levels of imports from the Persian Gulf for almost 60 years. Untapped oil resources along Alaska’s Arctic coastal plain could replace imports from Saudi Arabia for 25 years.
- There are 1.2 trillion barrels of shale oil that are nearly economically recoverable. The richest and most abundant deposits of oil shale are on federal lands managed by the U.S. Department of the Interior.
Despite these untapped resources, according to the Interior Department, we can access just 3% of onshore federal oil and 13% of onshore federal gas under standard lease terms. In other words, only this small percentage can be accessed without being subject to major, additional regulatory hurdles.
All told, 51% of the oil and 27% of the gas in the United States are completely off limits. Less than 19% of the Outer Continental Shelf is open to development. Restricted access to domestic resources means that America must import 60% of its petroleum from abroad, some of which comes from unstable countries and geopolitical adversaries of the United States. Restrictions on natural gas development have resulted in uncompetitive U.S. gas prices, which have already driven jobs and industries overseas.
Refinery Capacity and Security
Securing ample supplies of oil and gas represents only part of the equation. We must maintain, expand, and protect the critical infrastructure needed to refine and transport this energy.
- In 1981, the United States had 324 refineries with a total capacity of 18.6 million barrels per day. In 2005, there were just 132 oil refineries with a capacity of 16.8 million barrels per day.
- Growing demand for gasoline has been met by expansion of existing refineries, but expansion has proved difficult under the weight of numerous state, federal, and local regulations and roadblocks.
- Badly needed pipelines, liquefied natural gas ports, and other facilities have been stymied by intense “not-in-my-backyard” opposition.
- Foreign refineries are gaining market share, partially filling the domestic refining gap. Currently, 10% of America’s gasoline is refined overseas, but that source of supply is complicated by domestic fuel formulation regulations.
Fewer domestic refineries, along with greater reliance on foreign refineries, carry important national security implications. So, too, does the concentration of a significant share of our oil production, pipeline, and refinery capacity in areas vulnerable to hurricanes.
The Electricity Grid in the Computer Age
Electricity has grown in importance because it powers the information age economy and our abundant way of life. The energy resources, infrastructure, and conveyances needed to produce and deliver electricity to our homes and computers are also overstretched and subject to stringent restrictions.
In 1940, 10% of energy consumption in America was used to produce electricity. In 1970, that share was 25%. Today, it is up to 40%.
The information economy requires massive amounts of electricity. Electricity consumed by computer servers has doubled in five years and will increase another 75% by 2010.
However, while electricity demand increased by about 25% since 1990, construction of transmission facilities decreased about 30%.
In fact, annual investment in new transmission facilities has declined over the last 25 years.
With anticipated economic growth, use of technology, and the near-term retirement of many aging plants, service quality will degrade and costs will go up unless substantial amounts of capital are invested over the next several decades in new generation, transmission, and distribution facilities.
Electricity does not come from turning on a switch. It comes primarily from coal and nuclear fuels that are converted into electricity in the nation’s power plants. Continued opposition to expanding these sources and facilities could one day bring our technology-driven economy and lifestyles to a grinding halt.