Is US Energy Independence On Its Way?

Summary //

• The US is knocking on the door of achieving energy independence by becoming a net energy exporter.
• Even as the US achieves energy independence and becomes a leading energy exporter, some energy imports will still be required.
• The combination of growing domestic production and rising exports is not just a recipe for energy independence but also creates a strong fundamental backdrop for midstream.

US energy independence carries different meanings depending on each person’s views and experiences. History buffs may be reminded of a speech from President Nixon during the 1973 oil embargo. Energy industry stakeholders likely think of growing US oil and natural gas production. Others may think of energy independence in the context of needing more renewable energy solutions or greater energy efficiency. Depending on your view, the term US energy independence may connote a patriotic aspiration, a political buzzword, or an impossible feat.

In this piece, we discuss the different definitions of energy independence, US progress towards this milestone, and the role of US oil production in achieving energy independence. If we define energy independence as becoming a net energy exporter, the US is poised to become energy independent next year. However, the positive outlook for US energy production growth and rising exports goes beyond merely achieving energy independence.

What does energy independence mean?
Energy independence is open to interpretation. For many, energy independence means exporting more energy than we import. Others take a stricter view and argue that energy independence means the US is totally self-sufficient for energy and imports are nil. This energy self-sufficiency was generally the case for the US prior to the 1950s. Clearly, a lot has changed since then with US energy consumption, among many other things (try finding a poodle skirt at your local mall).

If we use the relatively lower hurdle – though still impressive feat – of exporting more energy than is imported, the US is knocking on the door of energy independence. On the other hand, the likelihood of the US importing zero energy and achieving energy self-sufficiency seems highly unlikely for the foreseeable future (discussed more below).

How close is the US to energy independence (based on net exports)? Pretty close.
As we discussed in our July Fourth post from last year, the US energy landscape has been completely revolutionized over the last decade. The US became the world’s largest producer of natural gas in 2009, and the world’s largest producer of oil last year, not to mention other milestones shown in the timeline below. Rising domestic production of oil and natural gas has led to lower imports and growing exports, driving a decrease in total net imports. According to the Energy Information Administration (EIA), total net energy imports in 2018 accounted for a modest 3.6% of total energy consumption – the lowest percentage in over sixty years. In its Annual Energy Outlook 2019, the EIA projects that the US will become a net energy exporter in 2020. Key to achieving energy independence have been changes in oil production and trade.