We are in an economic mess for the ages. Federal debt and deficits continue to skyrocket to mindboggling heights and economists agree we are headed straight to disaster. Meanwhile the unemployment rate stands at a whopping 9.1 percent two years into the economic "recovery."
The answer to this quandary, or at least a good part of the answer, is just under our noses. I'm talking about domestic energy production.
Here's the current situation.
The United States has about 4.6 percent of the world's population and consumes about 25 percent of the world's oil. As domestic production has fallen, the amount of oil imported has gone from 10 percent in 1970 to more than 66 percent in 2007. The amount imported is estimated to grow to 70 percent to 75 percent by the middle of this decade.
In 2007, the United States imported 3.66 billion barrels. At today's prices, that amounts to about $348 billion and growing sent overseas every single year. But the problem isn't just economic. Much of the oil we use is imported from less than friendly OPEC nations. And, we are hugely vulnerable to supply disruptions, which are a real possibility given the recent instability in the Middle East.
This is an old and well-known problem. The arguments have long been postured (i.e. do away with the red tape holding up offshore drilling and allowing development in parts of Alaska). Most people are unaware that the landscape has drastically changed recently.
Rapidly evolving technology combined with higher energy prices have dramatically increased sources of fossil fuels (oil, coal and natural gas) that have been discovered and can now be profitably developed.
The extent to which these factors have changed our domestic energy picture is absolutely miraculous.
A report issued by the Congressional Research Service (CRS) in November 2010 estimated that America's fossil fuel resources are the largest of any country on earth. In fact, our resources eclipse those of Saudi Arabia, China and Canada combined.
The report estimates that the United States has enough oil to replace what's imported from the Persian Gulf at current rates for 50 years, enough natural gas for 100 years and enough coal for 200 years at current consumption rates.
But that might just be the tip of the iceberg. The report doesn't even include the incredible and potentially game-changing potential of oil shale deposits and methane hydrates.
For example, new rock fracturing technology that became available in 2008 has enabled a boom in development of oil shale deposits. The Bakken formation in North Dakota is estimated to have 18 billion barrels of oil in reserves, but many believe this estimate to be low.
Some believe that methane hydrates (natural gas locked in ice) is the energy source of the future and could provide energy for hundreds or even thousands of years. The CRS report estimates this potential resource as "immense" and possibly larger than all the other fossil fuel reserves combined.
This energy source is also the cleanest burning of all fossil fuel sources.
Developing a coherent energy policy that supports development of domestic energy sources could easily wean us off foreign energy dependence in the not-too-distant future. Such energy independence would greatly enhance our balance of trade and strengthen the dollar as well as our national security.
Unfortunately, the Obama administration has largely blockaded development of fossil fuels with red tape and delays in favor of clean energy development.
While there's nothing wrong with clean energy, its widespread use is a long way away. It's estimated that 85 percent of global energy will come from fossil fuels until at least 2035.
The jobs created by an all out attempt to develop these energy sources and become energy independent could put a huge dent in the high and lingering unemployment rate. As well, a booming energy industry could propel tax revenues to help pay down the current deficit.
Our economic problems are far too severe to fail to properly manage a potential booming industry and all the economic benefits it would provide. As bad as today's problems seem, there are answers – and development of domestic energy is a big one.
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