United States crude production, led by the shale revolution, hit peak production of more than 13 million barrels per day (bpd) in 2020. After a decades long slump in field production and having assumed a position as a net importer of oil, the transformative resurgence in production flipped America to a net exporter of hydrocarbons and positioned the nation as a pivotal player in the balance of global supply and demand for petroleum.
Unfortunately, the collapse in demand for crude oil and refined products caused by the economic shut down related to the COVID pandemic coincided with U.S. production reaching levels unimaginable even a few years ago. Several industry experts are now claiming peak oil has been reached and the 25-30% drop in ultimate demand for fossil fuels will never return. With the future unknown, the question of how the U.S. will fulfill our domestic needs is even more complex when you add the development and demand for renewable sources of energy to the equation.
So how will the nation look in the future with a seemingly oversupply position in fossil fuels and a heightened focus on alternative, environmentally-friendly supply options? Our view is that both options are essential and will find a natural balance in fulfilling the market needs. And our reasoning is backed by the numbers.
We are coming off a period where total energy consumption in the U.S. reached the highest level since data collection began in 1949, according to the Energy Information Administration (EIA) with fossil fuels still representing the majority of our energy supply (roughly 80%). Despite very negative perceptions, coal is still a meaningful supply of U.S. energy, roughly 15%, and globally as well.
Renewable energy (wind and solar) meanwhile only comprises 4% of the market. Solar energy, however, has seen large, relative growth. In the last 10 years, production has grown almost 50-fold. Overall, about two-thirds of all solar energy was produced by electric utilities, with solar setups on homes and commercial buildings accounting for the rest. Still, solar accounts for only 1% of the country’s total energy production. Hydropower remains the largest source of renewable energy at 2.8% of total production.
Two ways to gauge our national energy consumption are in per capita energy use and energy consumption as it relates to national productivity or real gross domestic product (GDP). For both of these metrics, the country has seen marked improvement. Per capita consumption of energy has decreased more than 14% since the turn of the 21st century. Similarly, the U.S. economy has made huge strides reducing the energy required to generate a dollar of real GDP since World War II. In 2018, it took 64% less energy.
As we look forward, we see the future showing progress for all energy sectors across the board. That means more renewable sources of energy, better technology to reduce the negative impact of fossil fuels and great strides in the efficiency of use in the energy we consume. With a comprehensive approach, the United States will have a strong energy sector, a competitive economic model and continue to respect the impact of the use of the various supply options.
Whether you drill, refine or finance it, the state of the oil and gas industry affects us all. As a support service provider to the industry, it’s our job at Eddye Dreyer to stay on top of industry trends in order to maximize your return. Want to discuss this topic more? Let’s talk.