Energy Production and Policy: Quickly Changing; Increasingly Relevant

Posted on 01-18-2017

By Assistant Professor Jeremy Weber

It is hard to grasp how fast you are moving when reading a book sitting in a jet cruising at 30,000 feet. Doing so requires attention, the fixing of points, and measurement.  A look at energy data and news shows that U.S. energy production and policy are changing rapidly, with growing relevance.

Consider the changes in U.S. energy production in the last decade.  From January of 2006 to January of 2016, natural gas production increased by 43 percent and oil production increased by 82 percent (see Figure 1). By contrast, coal production fell by one third. Because the U.S. was a leading global producer of all three commodities in 2006, the percentage changes represent massive economic gains (or losses). Pennsylvania’s economy in particular is intertwined with the trends in natural gas and coal. The state has long been a major coal producer and has therefore felt the effects of declining production. At the same time, the state that has contributed more to the growth in national natural gas production than any other state.

The percentage change in the consumption of wind, solar, and biofuel energy was still greater, with increases of 631, 758, and 213 percent.  The large percentage increases are not merely because of little initial consumption of renewables. The absolute increases are large enough to matter.  In 2015 and 2016, the Energy Information Administration reports that renewable generation capacity accounted for about two-thirds of all capacity added in the US.

Figure 1 – Changes in the U.S. Energy Landscape, 2006-2016

Note: Data are from the Energy Information Administration, U.S. Department of Energy, with elaboration by the author. The changes in fossil fuels are based on production; the changes for renewables are based on consumption.

Major changes also occurred in the policy arena. Here are a few:

  • 2007: the Energy Independence and Security Act greatly expands the Renewable Portfolio Standard for the use of biofuels in the transportation sector.
  • 2009, 2013, 2014, 2016: the Renewable Electricity Production Tax Credit is extended.
  • 2015: the ban on crude oil exports from the U.S. is lifted.
  • 2015: President Obama announces the Clean Power Plan.
  • 2016: the Paris Agreement on climate change is signed

The implications of the changes in Figure 1 and the policies associated with them are extensive. The growth in oil and gas production has reduced less imports, increased exports, and redrawn the global energy trade. Faced with more competition from U.S. producers and lower prices, governments in many energy producing countries struggle to maintain public spending as oil revenues fall. Domestically, growing production has created hundreds of thousands of jobs for workers and tens of billions of dollars in income for owners of oil and gas rights. Locally, new or expanded oil and gas drilling near residential areas has led to increased truck traffic, noise, and concerns over air and water quality. The growth in natural gas production stimulated the decline in coal production and use, helping to reduce greenhouse gas emissions nationally. Politically, the state of the coal industry surfaced in the presidential election, with Trump and Clinton taking markedly different stances on policies related to the industry.

My research at the University of Pittsburgh’s Graduate School of Public and International Affairs has addressed many of the state and local consequences of increased oil and gas production, including effects on employment and income, land and housing values, property tax rates, and school performance. As a whole, the work testifies to the diverse and extensive links between the oil and gas industry and local communities. The links illustrate how energy policy is about more than energy, with relevance many issues of public interest, including the taxes we pay, the air we breathe, and the international leverage of our government.

Clearly, it’s a fascinating time to study energy issues and policy.

About the blog: The GSPIA Energy and Environment blog provides commentary and analysis that furthers understanding of E&E issues of public interest. Its primary contributors are GSPIA faculty and students.

Jeremy Weber is an Assistant Professor at the University of Pittsburgh, Graduate School of Public and International Affairs and the Department of Economics. His research cuts across energy, agriculture, the environment, and well-being. He teaches classes in quantitative methods and energy and environmental policy. 

 

 

 

 

 

 

 


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