In the 51 years since the Arab Oil Embargo, the U.S. became the world's largest crude oil and natural gas producer, transforming it from a net energy importer to a net energy exporter

Technology and private property ownership of mineral rights made it possible.

The Arab Oil Embargo in 1973 caused gasoline shortages and long lines of cars at gas stations.

I find it hard to believe that 50 years have passed since I received a Ph.D. in Economics and began my professional career. In August of 1974, I started what I thought would be a lifelong career as a university professor with a focus on monetary theory and econometrics. I accepted the position of Assistant Professor at Clemson University and began teaching and publishing articles in academic journals. A year later, I was named Head of the Department of Economics and was looking forward to a lifelong career of university teaching and writing.

As excited as I was about my academic career, I had been captivated by an event that occurred the year before I started teaching at Clemson—the 1973 Arab oil embargo. Like most people at the time, I had not given much thought to the fact that the U.S. depended on a very politically unstable part of the world for its energy. The oil embargo and waiting in long lines for gasoline was a wake-up call that focused my attention on energy issues.

After teaching at Clemson for 3 years, I accepted an offer to become an energy economist at a large natural gas pipeline company in Houston and never looked back. After a few years, I started my own energy consulting company, Energy Planning Associates, which morphed into a natural gas marketing and gathering company and later an oil and gas drilling and production company. After retiring from those ventures, I got back into the energy industry in 2007 as the Executive Director of the Barnett Shale Energy Education Council. I came full circle in 2015 when I became a professor at TCU, teaching graduate and undergraduate energy courses in the business school.

During the almost 50 years I have been involved in the energy industry, the United States has undergone an energy transition that few foresaw or believed possible. This transition was from a country that had supposedly depleted its oil and natural gas resources, making it dependent on OPEC and other countries for its energy, to a country with the largest crude oil and natural gas reserves in the world, enabling it to become the world’s largest producer of crude oil, natural gas, and petroleum products.

The notion that the U.S. oil and gas was running out started with the first oil well drilled in Pennsylvania in 1859. Naysayers said the “Drake Well” was a one-off and would soon be depleted. Those beliefs were eventually given a scientific underpinning when M. King Hubbert, a petroleum geologist with Shell Oil Company, famously predicted in 1956 that U.S. crude oil production would follow a bell-shaped curve and peak between 1965 and 1970. Sure enough, U.S. production of crude oil peaked in 1970, and some declared Hubbert to be a prophet:

Jimmy Carter, who became the 39th President of the United States on January 20, 1977, believed that the U.S. had reached peak oil and natural gas and needed to conserve the remaining reserves. He signed into law the “Power Plant and Industrial Fuel Use Act of 1978,” which proclaimed that crude oil and natural gas reserves were depleted and should not be wasted generating electricity. The “Fuel Use Act” declared that coal was henceforth the preferred fuel to generate electricity. Those who wonder why the U.S. has so many coal-fired power generation plants can thank Jimmy Carter. But I digress.

As it turned out, M. King Hubbert’s peak oil theory was wrong. The U.S. was not running out of crude oil and natural gas. In fact, it had vast untapped reserves of both. The critical factor that M. King Hubbert ignored was technology. When new hydraulic fracturing technologies became widely used in the Barnett Shale and other shales starting in the late 1990s and early 2000s, natural gas production began increasing in 2005. The primary reason shale development was successful whereas it failed in other countries is that mineral rights are owned by individuals, not the government. Landowners chose to lease their mineral owners of shale developers. As shown in the graph below, these factors propelled the U.S. to become the world’s largest natural gas producer starting in 2009 and the upward trend has continued to today:

The use of hydraulic fracturing in crude oil-bearing shales came a few years later, and in 2015, the U.S. became the world’s largest oil producer. In October 2021, the U.S. became a net petroleum exporter:

The remarkable transformation of the United States from a net energy importer in 1974 to a net energy exporter of crude oil, natural gas, and petroleum products in 2021 was highlighted recently by the Energy Information Administration (EIA) in its October 29, 2024, edition of “Today in Energy:”

In October 1974, in the wake of the 1973 Oil Embargo, the Federal Energy Administration—the predecessor of the U.S. Department of Energy—published the first issue of the Monthly Energy Review (MER), an overview of the energy produced and consumed in the United States. In the 50 years since that first publication, the U.S. energy sector has transformed.

In 1974, the United States consumed more energy than it produced domestically and was a net importer of energy from other countries. Today, the United States produces more energy than it consumes domestically and is a net exporter of energy to other countries (emphasis added).

EIA highlighted the U.S. energy transition with this graphic:

This EIA graphic shows that in the first seven months of 2024, compared to the first seven months of 1974, U.S. total energy production increased by 24.1 quadrillion British thermal units (quads), a 68% increase. During the same period, total domestic energy consumption increased by 13.2 quads, from 41.6 to 54.8. In less than 50 years, the U.S. transformed from a net energy importer to a net energy exporter. EIA defines total energy as coal, natural gas, petroleum, nuclear, and renewables.

It has been a truly remarkable energy transition.

My take: One year after the 50th anniversary of the Arab oil embargo and roughly 25 years since the introduction of modern hydraulic fracturing in the U.S., it is fitting that Donald J. Trump was recently reelected to be the 47th President of the United States. One of his high-priority promises is to enact more policies to increase crude oil and natural gas production by promoting “fracking” to ensure the U.S. remains energy-dominant.

U.S. crude oil and petroleum products, natural gas, and LNG exports will be unshackled on Inauguration Day, January 20, 2025, solidifying the U.S. as the world’s largest producer and exporter of hydrocarbons. Not only will the U.S. economy benefit, but countries all over the world will benefit from increased exports of U.S. crude oil, petroleum products and LNG. Billions of people all over the world will be helped out of energy poverty, a high priority of President Trump’s choice for the new Secretary of Energy, Chris Wright.

What a tremendous gift for the United States and the world starting January 20, 2025.

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