The Pro-Growth Energy Economy Begins to Emerge

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The Pro-Growth Energy Economy Begins to Emerge

In less than 100 years, the United States rose from being a small former colony to being the world's largest economy. As we've explained in prior issues of Trends, this involved a unique convergence of competitive advantages like:

  • An entrepreneur-friendly culture
  • Easily defensible borders and militarily weak neighbors
  • Excellent harbors and rivers to support trade
  • The world's most productive farmland
  • A sophisticated legal system
  • An abundance of forests and minerals

Among those mineral resources, none was more important than an abundance of easily accessible coal, petroleum, and natural gas. In fact, our access to cheap domestic energy, whenever and wherever we needed it, was a major factor in the ascendancy of the United States. However, over the past half-century, the U.S. has lost its energy independence, and the associated cost advantage.

U.S. Crude Oil Resources

U.S. Crude Oil Resources

Today, one of the primary reasons that 5 percent average annual GDP growth seems so hard to attain is that the United States has unilaterally disarmed itself by taking one of its greatest economic advantages off the table.

The price has not merely been economic; foreign policy since 1973 has largely been dictated by our need to keep oil flowing to the United States and its allies. And, in spite of safeguards like the Strategic Petroleum Reserve, the United States remains highly vulnerable to a major disruption in the global oil supply.

Ironically, in the nearly 40 years since the first major price shock of the '70s, the United States has done little to reduce the threat of supply disruptions that could greatly undermine our economy. A well-placed terrorist attack on a major oil field in Saudi Arabia, or a coordinated cut in oil production by Iran and Venezuela, would lead quickly to an enormous spike in energy prices, which could easily send the global economy into a new recession or worse.

Such disruptions are quite possible, since the regions that supply most of the world's energy are controlled or threatened by interests hostile to those of the United States, the EU, and Japan. Compounding the issue is the fact that state-owned enterprises hold 90 percent of the world's oil reserves...

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