Historical Trends in US Energy Consumption and Imports
In 1900 domestically mined coal provided 90% of the US energy supply, but by 1930 this share was cut by a third; the use of cars drove the consumption of petroleum, and hydroelectricity and natural gas usage also significantly increased. All of these energy sources were domestically produced, and the US was a major exporter of fossil fuels; “U.S. oil fields accounted for slightly less than two-thirds of world oil production in 1920, slightly more than two-thirds in 1945, and 16.5 percent in 1973” (Painter 2014). The US oil majors also worked hand in hand with the US state as they started to develop deposits abroad, with control of the core energy source required for modern industrial nations having major geopolitical ramifications in addition to profit making. For example, the 1928 Red Line Agreement allowed for the domination of Middle East oil production by seven western oil corporations; five of which were American. Monopolies and trusts were central to the fossil fuel sector, with Standard Oil controlling 90% of US oil refining capacity in 1880. This had been reduced to 65% by the time the company was broken up in 1911 under the Sherman Act, due to the continued rapid growth in the sector. Many coal mining companies claimed penury when asked for wage rises but were in fact transferring those profits to railway corporations that they also had ownership interests in; the concept of transfer pricing that has been extensively used by TNCs in the present day.
The geopolitical importance of oil had been underlined by the 1941 US oil embargo of Japan and the 1953 US and UK backed Iranian coup that overthrew an elected leader who threatened the control of Iranian oil production by those two nations. The dominance of the US oil majors over US energy policy was underlined by repeated anti-competitive measures taken by the US government to bolster domestic oil prices. In 1933 the government instigated production rationing to stop cheap oil from flooding the marketplace and in 1959 oil imports were restricted to a maximum of 9% of domestic demand to stop a plethora of new foreign production sources from crashing the domestic price of oil. The latter resulted in significantly higher oil prices within the US with respect to global oil prices, an explicit subsidy provided by US oil consumers to US oil producers. This was only removed in 1973 after the peak in 1970 of US oil production; a peak that occurred after a nearly continuous increase in US oil production that stretched back to the previous century. Climbing domestic demand then led to a rapidly growing trade deficit in oil products and the dependence of the US upon the Organization of Petroleum Exporting Countries (OPEC) oil cartel; a reality shown in the domestic oil shortages caused by the two Middle East driven oil shocks of 1973 and 1979. The oil trade deficit was thereafter reduced until the mid 1980s through price-induced US energy efficiencies and the stabilization of domestic oil production due to new finds in Alaska and the Gulf of Mexico.
US economic growth was aided by the ongoing fall in oil prices from 1980 until 2000, which acted to both increase real incomes and to lend support to the US car industry by supporting demand for less fuel efficient and much more profitable large vehicles; the minivan and sport utility vehicle came to provide the bulk of US automobile industry’s profits. Starting in the late 1990s there was also a slew of mergers and acquisitions between the large oil corporations, resulting in the “super-majors” such as Exxon Mobil. Domestic legislation required the increasing use of biofuels mixed with gasoline (predominantly corn-based ethanol), with about 10% of US fuel being composed of ethanol by the late 2010s. Although seeming to reduce oil import dependency and GHG emissions, the overwhelming evidence is that corn-based ethanol at best marginally contains more energy than is used to produce it – with a significant amount of that energy being diesel fuel - and creates only marginally less GHGs than oil production. Resultantly, the legislation has been seen as more a forced consumer subsidy to large corporate agriculture than providing increased energy security and reduced GHG emissions.
Technological breakthroughs that allowed for the exploitation of shale oil and gas, supported over an extended period by the US development state, completely changed the energy security position of the US within a decade. From being heavily dependent upon oil imports in 2010, the US has become nearly self-sufficient in oil products and has become a net exporter of natural gas. Together with the increase in Canadian Tar Sands production, which relied upon the patient support of the Canadian development state, this created a surplus within the global oil market. This surplus allowed the US to place extensive economic and financial sanctions upon oil producing nations that have not fully integrated with the neoLIO, specifically Iran and Venezuela, without creating substantial and damaging increases in oil prices. The US has also placed such sanctions, but not explicitly restricting fossil fuel exports, upon Russia. The belated attempts to stop the Nordstream 2 gas pipeline between Russia and Germany were an escalation in this respect (Jacobs, Wadhams & Paulsson 2019). As well as the stated “security” concerns, the new competition between the US and Russia for European gas imports may also be a factor. With the Russo-Ukrainian war, heavily triggered by Western actions, the US has been able to cut Europe off from Russian natural gas and made it heavily dependent upon much more expensive US liquefied natural gas (LNG) exports.
US domestic primary energy consumption is predominantly provided by oil and natural gas, with the balance provided by coal, nuclear, hydro, and a small share of new renewables (predominantly wind and solar). US energy intensity increased in 2018, after four years of improvements (BP 2019a); this increased energy usage was predominantly supplied by natural gas and oil. Coal consumption fell, as natural gas and new renewables consumption increased. The new renewables have been provided with limited government support, but their capacity growth rate has been relatively constrained while their share of primary energy consumption was only 8% in 2021. The political strength of fossil fuel interests in the US still represents a significant bar to an energy transition, as shown by the lukewarm climate change and energy transition policies of the Obama administration, the outright repudiation of such policies by the Trump administration, and the difficulties experienced by the Biden administration in getting new policies passed.
US Energy Sources
Geopolitics and Energy Security
Being self-sufficient in fossil fuel energy supplies, and with energy exporting nations on its borders, the US can be deemed to be energy secure. As a rich nation with a highly diversified economy and relatively small net exports of fossil fuels, it also has little reliance upon energy export revenues; a dependence completely nullified by its possession of the global reserve currency. The US was becoming more energy insecure after its domestic oil production peaked in 1970 while demand continued to increase, but this position has been reversed with the recent massive increases in domestic oil and gas production (and the increases in Canadian oil production).
With the exception of the three decades following the 1970 domestic oil production peak, the US has tended to utilize its domestic fossil fuel resources as a facilitator of foreign policy actions designed to produce insecurity in nations oppositional to what it has determined as its interests (and/or those of the US fossil fuel corporations). This was the case with the Japanese oil embargo in 1941, when the US was the dominant global oil producer. It has most recently been the same with respect to the sanctions against Venezuela and Iran that have had the side effect of reducing global oil production at a time of US-induced global glut. Sanctions have also inhibited new oil and gas exploration with respect to Russia, as well as delaying that nation’s ability to sell more natural gas to Europe.
Industrial Policy
Unlike the consistent multi-decadal support for the innovations that allowed for the exploitation of shale oil and gas, state development support for renewable energy has been limited and inconsistent; suffering from its alignment with the politically-contested concept of climate change (in the US) and lack of political power with respect to the fossil fuel industries. The promising Wind Energy Systems Act of 1980 was quickly reversed by the Reagan administration, with federal R&D funding falling to minimal levels by 1988 (Jones & Bouamane 2011). The lead was taken by Denmark and Germany. Later, extensive Chinese government support allowed China to develop a large wind energy industry. With respect to solar, “In 1986 President Reagan removed even the solar panels which President Carter had installed on the White House” (Ibid., p. 25). During the 2010s global crisis of over-capacity in solar photovoltaic (PV) manufacturing the Chinese state continued to provide significant ongoing support to its manufacturers, in contrast to the much more limited US state approach (Fialka 2016); resulting in global dominance by the Chinese manufacturers. The only major US electric vehicle manufacturer, Tesla, has been heavily dependent upon early-stage federal loans, its ability to realize significant revenues from the sale of excess EV credits to other manufacturers, and politicized consumer subsidies for EV purchases; an increase in the number of vehicles covered by US federal subsidies was vetoed by the President Trump in late 2019, but increased subsidies were implemented by President Biden in 2023. State supportive policies have been seriously constrained due to a combination of the dominant market-fundamentalist discourse and oppositional fossil fuel interests that have been able to discoursally and politically restrict any attempts at policies related to climate change. This has involved the lack of ratification of both the Kyoto protocol and the rejection of the Paris Accord by President Trump (reversed by President Biden). This failure of state development policy, across both Democrat and Republican administrations, has placed the US at a significant disadvantage with respect to the green technologies that may represent a major basis of future economic growth and geopolitical power (International Renewable Energy Agency [IRENA] 2019). The political dominance of fossil fuel interests with respect to energy policy is underlined by an Obama administration that oversaw a massive expansion of shale oil and gas production; an expansion that President Obama was happy to celebrate as an achievement of his administration (Meacham 2018).
There have been some limited attempts to support the nuclear industry, but these have not reversed the long-term decline of that industry. This decline, as well as the decline of the coal industry, is predominantly the result of the North American glut in natural gas stemming from the shale gas revolution; with some impact from the increases in wind and solar electricity generation.
The dominance of fossil fuel interests within the US provides a very limited range of policy options – from a mix of limited support for renewables while still providing significant policy support to the fossil fuel industry (Obama) to outright and unapologetic support to the fossil fuel industry (Bush, Trump). With respect to international climate change negotiations the range has been between lukewarm support for global climate agreements (Obama) to outright rejection of those agreements (Bush, Trump). Such a limited range of policy options can be expected to continue short of fundamental domestic political economic changes, a secular fall in global oil production, or a climate emergency. The energy policy focus of the Biden presidential campaign in late 2020 belies this reality, with its reliance on the capture and storage of GHGs rather than on a significant reduction in the usage of fossil fuels (Horn 2020). The need to limit the relative GDP growth gap with respect to the faster growing China will also tend toward state support of a shale oil and gas industry that has been one of the greatest areas of strength within the US economy.
US: Current Drivers of Energy Policy
Entering into the climate change arena is moot. IMHO The reality is that CO₂ warming was a poorly-chosen strategic deflection from the difficulty of dealing with the vast majority of fossil fuels being in the hands of countries hostile to the West. Elon Musk has partially vindicated this strategy by innovatively introducing the EV that will reduce fossil fuel demand by ⅓. However, there remains the existential question of the reliance of military power on fossil fuels for explosives and air power, and thus USA research into rail guns and zero carbon systems.
Thank God for democracy!