While conservatives would say that Obamacare is sinking the American economy – and they’re right – another commodity has added an astronomical amount to the national debt: high oil prices. Dr. Robert Wescott of Keybridge Research and Dr. Phillip Swagel of the University of Maryland and the American Enterprise Institute (AEI) released a study showing that $1.2 trillion has been added to the debt as a result of this market.
Based upon economic modeling performed with the University of Maryland’s INFORUM LIFT U.S. Model, the report found that if oil prices had increased at the same rate as other goods and services from 2002 to 2012, instead of quadrupling as they actually did:
- The U.S. federal budget deficit in 2012 would have been $235 billion dollars lower;
- The increase of U.S. debt between 2003-2012 would have been $1.2 trillion lower; and
- The debt-to-GDP ratio in 2012 would have been 6.6 percentage points lower.
The report also found that reduced oil dependence achieved through such measures as expanded use of alternative fuel vehicles and improved fuel economy would:
Make the U.S. federal budget deficit $492 billion lower in 2040;Result in $5 trillion less accumulated debt between 2014-2040; andResult in a debt-to-GDP ratio that is 10.3 percentage points lower in 2040.
- Make the U.S. federal budget deficit $492 billion lower in 2040;
- Result in $5 trillion less accumulated debt between 2014-2040; and
- Result in a debt-to-GDP ratio that is 10.3 percentage points lower in 2040.
“Oil dependence is a trillion dollar budget problem,” said report co-author Phillip Swagel. Report co-author Robert Wescott added, “Reducing U.S. oil dependence would have beneficial economic effects and give policymakers more flexibility in dealing with fiscal, economic, and national security issues in the future.”
Yet, concerning oil dependency, AEI also reported last August that U.S. oil output had increased to 2 million barrels/ day in just two years. That’s a twenty-four year high!
[A] 2 million bpd increase in US oil output in only 24 months to the highest level in nearly a quarter century, as a direct result of the dramatic increases in shale oil production made possible by the revolutionary, breakthrough drilling technologies of fracking and horizontal drilling, is an important energy milestone and has to be one of the most remarkable success stories in the history of US energy production. To put a 2 million barrel per day increase in US oil production into perspective, that would be like adding the entire daily oil output of Brazil (2 million bpd in 2012) to the US oil supply, and almost as much as adding the entire output of Venezuela (2.3 million bpd in 2012) to the US oil supply. That’s pretty amazing — thanks to advances in drilling technologies, it’s as if we’ve discovered all of Brazil’s vast energy resources right here in America, in places like North Dakota, Oklahoma, New Mexico, and Texas. Welcome to America’s shale revolution.
In fact, the International Energy Agency wrote in November of 2012 that by 2017 the U.S. could be the largest oil producer and a net oil exporter by 2030.