U.S. Energy Sector Has Undergone Transformation

Over the past 50 years, the U.S. energy sector has been transformed, moving from a country that used more energy than it produced to one that can meet its own energy needs and export additional fuel sources.

The U.S. Energy Information Administration (EIA) recently produced an analysis showing that since 1974, energy production has increased by about 60% from 35.6 quadrillion British thermal units (quads) to 59.7 quads. Production has increased at a faster rate than the country’s consumption of energy, which has risen by about 32%, or 13.2 quads more, in the same time period.

In 1974, the U.S. was dependent on foreign oil and still recovering from the 1973 Oil Embargo imposed by the Organization of Petroleum Exporting Countries (OPEC) against the United States and several other countries over their support for Israel during the Israeli-Arab War.

The embargo banned oil exports to the U.S. and other countries and put in place cuts in oil production. This led to a spike in gas prices in the U.S, rapidly rising inflation, and gasoline shortages, which led to long lines at gas stations. 

But since those days, the U.S. has become a self-sufficient energy producer, primarily due to improvements in drilling technology and the development of horizontal drilling and hydraulic fracturing, which unlocked oil and gas reservoirs in several areas, notably Texas, North Dakota, and the Marcellus shale gas play in the Appalachian region.

The U.S. is now the world’s largest crude oil and natural gas producer and the U.S. now is a net exporter of those fuels to other countries. The export of liquefied natural gas has been growing exponentially and the U.S. became the largest net exporter in the world in 2023, with the amount shipped overseas expected to continue to rise.

Natural gas has also been increasingly used for power generation, as it is a cheaper and cleaner alternative to coal-fired plants. In addition, the amount of renewable energy added to the mix as also been increasing rapidly, overtaking coal in the share of electric generation in 2020 and continuing to rise.

Renewable sources of energy, including wind, solar, and hydropower, now account for about 20% of the U.S. energy mix. This has come at the expense of coal, which has seen its share of use in power generation fall to below 20%, down from its high in 2005.

The energy mix of the U.S. is likely to continue to evolve as renewable energy technology continues to improve and the amount of energy needed to meet the increasing demand across the country due to the increase in AI and development of data centers continues to rise. This could affect the equation of energy production vs. energy consumption, as demand for electricity is rising rapidly and the available supply is tightening, a situation which must be addressed in the near future.