While the United States has more untapped fossil fuels than any country in the world, it still relies on imports and is not fully utilizing an “all of the above” energy strategy when it comes to fossil fuel reserves. The global markets for fossil fuels, and the price differences across global hubs, creates large financial implications to the use of domestic fuels. While there is an abundance of fossil fuels, there is little incentive for corporations to develop the resources needed to fully create an independent energy system that utilized the abundant reserves.
The U.S. consumed 100.2 quadrillion British thermal units (Btu) in 2019, with 80% of those sources coming from petroleum, natural gas, and coal (EIA 2020). Even having plentiful domestic resources, the U.S. continues to import more petroleum than it exports which is expected to continue moving forward, even with 2020 being the first year of net exports (EIA 2021). The reason for the continued volume of imports stems from issues with refineries and lack of policy to balance global price risks.
Much of the U.S. oil refining capacity has been developed towards heavy crude oil, however, much of the domestic oil generated is light crude oil. Many of U.S. refineries have a glut of light crude oil available which depresses local pricing, and this same oil can often fetch much higher prices in global markets (Foreman 2018). This leads to a situation where excess domestic light crude oil is sold to external markets while heavier crude oil is imported for refining into the products we utilize in this country. Corporations looking to optimize their profits will continue this behavior unless there are policies that change this financial balance. To fully implement an “all of the above” policy regarding fossil fuel reserves and energy independence, the U.S. should be looking to incentivize refinery conversions and place tariffs on global imports to help drive the market towards utilizing local resources first as the country works on shifting to renewable energy resources.
Under the Obama administration, drilling moratoriums have halted the exploration and extraction of many of these areas as well. The Biden administration appears to be continuing that focus with the Department of the Interior cancelling oil and gas lease sales from public lands through June as they review the climate change impacts from these activities (Brown 2021). The balance between energy independence and clean energy resources is deeply embedded in this issue.
Currently, the United States is not implementing an “all of the above” energy policy regarding our available fossil fuel reserves. However, there are several reasons that caution from policymakers are warranted in these matters. With the IPCC stating the need to greatly reduce emissions over the next few decades to limit global temperature rise, investments made today for energy infrastructure can make a large difference (IPCC 2018). Policymakers are looking to position the economy to be competitive in a low-carbon future, limit issues with stranded assets, avoid carbon entanglement where governments become dependent on fossil fuel production rent and payments, and to reduce environmental pollution from energy production (Erickson, Lazarus and Tempest 2015). Continuing with a business as usual approach to extracting fossil fuels can exacerbate the already major issues that exist in the United States’ energy portfolio. While the U.S. may not be focused on energy independence solely, the moratoriums are focused on preventing even larger and longer-term issues related to our country’s energy requirements in a warming planet that requires carbon reduction solutions.
Author: Logan Callen
Brown, Matthew. 2021. US Ends Oil, Gas Lease Sales From Public Land Through June. Accessed April 21, 2021. https://www.todayville.com/calgary/us-ends-oil-gas-lease-sales-from-public-land-through-june/.
EIA. 2021. EIA Forecasts the U.S. Will Import More Petroleum Than It Exports in 2021 and 2022. Accessed April 20, 2021. https://www.eia.gov/todayinenergy/detail.php?id=46776.
—. 2020. U.S. Energy Facts Explained . Accessed April 20, 2021. https://www.eia.gov/energyexplained/us-energy-facts/.
Erickson, Peter, Michael Lazarus, and Kevin Tempest. 2015. Carbon Lock-in From Fossil Fuel Supply Infrastructure. Accessed April 21, 2021. http://www.jstor.org/stable/resrep02768.
Foreman, Dean. 2018. Why the U.S. Must Import and Export Oil. Accessed April 20, 2021. https://www.api.org/news-policy-and-issues/blog/2018/06/14/why-the-us-must-import-and-export-oil.
IPCC. 2018. Summary for Policymakers. Accessed April 21, 2021. https://www.ipcc.ch/sr15/chapter/spm/.