"Every barrel of oil or cubic foot of gas that we produce at home instead of importing from abroad means more jobs, fast growth, and a lower trade deficit," said Gene Sperling, director of the National Economic Council, and Jason Furman, chairman of the Council of Economic Advisors, in a White House blog posting.
The bloggers note that nearly 35,000 jobs have been created over the past 4 years in oil and gas extraction alone, with more jobs along the crude oil supply chain. New techniques and technologies of the industry have increased productivity, growth, and national income. And terms of trade have improved through lower dependence on foreign oil and higher net overall exports, raising standards of living and economic growth rates. More recently, increased oil and gas production "played a big role" in better-than-expected second-quarter growth in gross domestic product as the trade deficit in petroleum fell to a record low in June.
"Economic news like this is just one more reason for us to celebrate the resurgence of domestic oil and gas production," the authors concluded.
Spurring production?
This White House blog post sounds like advocacy for spurring oil and gas exploration and production. So what about the tens of billions of dollars in punitive tax hikes proposed by the president, which if enacted would reduce US drilling and, eventually, production? What about slow federal leasing and administration initiatives to regulate hydraulic fracturing and wellsite emissions of methane?
These actions by the administration do not "celebrate" the recent increase in oil and gas production.
Frederick J. Lawrence, chief economist of the Independent Petroleum Association of America, says the administration and Congress too often work against the production gains hailed by the White House blog, which gives the government the credit that more properly belongs elsewhere.
"Thousands of independent oil and natural gas producers have played a key role in starting and building the unconventional shale and tight oil revolution, but obstacles continue to mount on the legislative and regulatory side," Frederick wrote recently for OGJ.
While proposing measures that would discourage oil and gas production, the administration toughens energy-efficiency standards and promotes renewable energy with mandates and subsidies. In fact, the US needs all forms of energy, but oil and gas supply almost two thirds of the country's energy demand.
Frederick said, "As the administration lauds biofuels and other renewable energy initiatives, the muted recognition to the country's innovative oil and gas producers (many of whom are small and medium-sized businesses) reminds me of the OPEC World Oil Outlook, which took so many years to actually recognize the 'unconventional' revolution taking place in the US but instead focused on fuel-efficiency standards, biofuels, and the role of the Caspian, Brazil, and Canada as the main drivers of non-OPEC supply growth. Perhaps, as more benefits are felt by the manufacturing sector as they build their own 'renaissance' on the back of increased domestic supply, the oil and natural gas producers will get their due credit."
Challenging Washington's ideas
As one of the nation's largest employers and purchasers of goods, America's oil and gas industry provides high-paying jobs, revenue to governments, and investment opportunities for millions of Americans, even in a struggling economy. The industry's enormous economic contribution and its role as a strong economic stimulus are challenging Washington's ideas, as shown by the White House blog.
"The key toward sustaining these economic benefits lies in the legislative and regulatory policy choices that the country makes today and in the years ahead—policy choices pertaining to access to the resource base and punitive taxes that will hamper development." Frederick said.
To enable the US to fully benefit from the enormous supply potential of unconventional resources, in other words, the White House needs to begin aligning its actions with its rhetoric.
