American oil and gas companies have been at the forefront of pushing innovation over the past 20 years. Yet strangely, outside of a few small think tanks and industry groups in Washington, we hear very little that is positive about this American success story and the benefits it has provided American energy consumers. The Shale Revolution has been underappreciated by Washington policymakers, to say the least.
The Shale Revolution has probably been the single most innovative development in the American economy over the past 20 years. The combination of hydraulic fracturing and horizontal drilling, along with a policy environment that enabled the development of such technologies, led to an increase in U.S. oil production from 4.9 million bpd in 2007 to 12.9 million barrels per day in 2019. Additionally, the Shale Revolution promoted national security and allowed the U.S. to turn the tables on OPEC. On top of that, economic studies of the Shale Revolution show that there were considerable benefits from shale development, including lower energy prices, increased royalty payments, and higher employment.
Yet, just about every week there is a congressional hearing in Washington D.C. devoted to promoting “the energy transition” or towards spurring innovation in the energy sector. Almost universally, these hearings focus on the government’s efforts to promote the development of technologies that remain unaffordable and unreliable for securing our energy needs. The narrative that renewable technologies are cutting-edge and innovative gets repeated in D.C., and those of us who work in energy policy circles hear about it ad nauseam.
According to the energy transition narrative, so-called “green” and “renewable” energy will continue to make enormous strides in lowering costs. Over time, these technologies will replace the energy sources that we have traditionally relied upon, namely oil and natural gas. One of the assumptions built into this that often goes overlooked in Washington policy circles is the fact that this narrative assumes that the oil and gas industry is no longer capable of innovating in similar ways. But anyone who is remotely familiar with the recent history of the energy industry should immediately be able to identify why this is such a mistake.
Although we tend to talk about the Shale Revolution as something that took place in the recent past, the Shale Revolution isn’t over yet. It has merely shifted to a new phase where shale companies are combining other new technologies to improve the production process. Today, it is clear that the industry remains devoted to pushing new technology, and finding innovative ways to produce oil and natural gas in safe and cost-effective ways.
For example, the oil and gas industry has been a leader in utilizing the Internet of Things (IoT) across the production process to improve production and ensure safety. New companies are making use of big data and advanced analytics to provide producers with information and new ways to visualize data. The industry has also been a leader in developing artificial intelligence platforms that help upstream companies develop resources as efficiently as possible. New technologies have been developed to help curb some of the industry’s externalities such as natural gas flaring. Oilfield services companies are constantly innovating to find safer and more cost-efficient methods of exploration and production. Blockchain is increasingly playing a larger role in oil and gas production as various companies have moved to using smart contracts for added security and transparency. Field staff in upstream operations have begun adopting augmented reality technology and wearable computers that help with worker’s safety and decrease downtime issues. Everywhere you look in the oil and gas industry you see innovation.
Unfortunately, many policymakers are unlikely to acknowledge the American oil and gas industry as the innovative success story that it is as long as a powerful anti-energy lobby continues to hold sway in Washington. But unlike other parts of the energy industry that are entirely dependent on being in Washington’s good graces to exist, the oil and gas industry just needs to do what it always has done—continue to find innovative ways to produce affordable and reliable energy for American energy consumers. It certainly appears to be on track.
Alex Stevens is the Manager of Policy and Communications at the Institute for Energy Research. In his role, Alex writes on the relationship between business and government in the energy industry as well as the effects of regulation and subsidies on energy markets.
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