Don’t Overhype America's Energy Revolution

Don’t Overhype America's Energy Revolution

10/14/14

Nikos Tsafos

Energy, United States

"The danger is that the United States will try to leverage energy for political ends and trigger unintended consequences."

The American energy “revolution” is about a decade old, although it only went mainstream around 2010. Much has been written about its causes and even more about its consequences—yet there is so much hype about how the “revolution” will reshape global geopolitics, that one is hard pressed to get a cool, honest breakdown of what has happened and what it means. The change has indeed been remarkable, but the implications for politics and economics are far less obvious at this time—and they will depend largely on whether America can resist the temptation to use energy for political ends.

The transformation in America’s energy has been speedy and remarkable. Since 2011, energy production has reached a new record each year: from trough to peak, oil production has risen by 50 percent (2008-2013) and natural gas by 34 percent (2005-2013); by contrast, coal has declined by 16 percent as it has lost market share to gas in the power sector. The changes in demand have been profound as well: energy use peaked in 2007 and has since declined. The country is using less oil and coal and more gas and renewables. Carbon emissions from energy are down 10 percent from their high point in 2007.

The boom in oil and gas production has, first and foremost, brought on a boom in oil- and gas-related jobs. Employment in oil and gas extraction has risen by 80 percent since 2003; in supporting activities, jobs have more than doubled. These jobs pay well: in oil and gas extraction, earnings were 66 percent higher than the average in August 2014, and wages are rising fast—after relative stagnation in the early 2000s, hourly earnings have risen by over 50 percent in the last decade (and they have really boomed in recent months). This is still a capital, rather than a labor-intensive industry and so direct employment is around 600,000 to 700,000 people (against total, nonfarm employment of 140 million in the United States). Even so, the benefits of the boom are clearly trickling down to workers.

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