In 1973 and 1979, the industrialized world was hit by two global events that sent oil prices skyrocketing, and in turn, created great economic hardship and uncertainty. The first event was the Yom Kippur War between Israel and her Arab neighbors, and the second was the Iranian Revolution that toppled the Shah of Iran and brought forth the strict anti-Western theocracy that still exists to this day. Both events constricted the global oil supply as members of the Organization of the Petroleum Exporting Countries (OPEC) in this volatile region had their hands on the spigot that controlled the flow of oil, raising prices to create the now-infamous gas lines in the United States. Coupled with a reduction in extraction and production in the Western nations which had already been steadily declining, the recipe for an oil and energy crisis was in place.
Fast forward to November 2019 when more geopolitical events in that same part of the world registered little to no effect on the economies or energy prices of America and the other industrialized nations. The U.S. stock market continued its upward climb and there were no lines at America’s gas stations.
What changed in the 40 years since the energy crises of 1973 and 1979 so that America did not experience the pain at the pump they did back then? America’s oil and gas producers developed revolutionary technologies that allowed for the extraction of oil that was always there, but never accessible before with old technologies.
Hydraulic fracturing of shale oil and natural gas deposits brought forth billions upon billions of barrels of oil and a similar number of cubic feet of natural gas to the point that America is now the dominant player in today’s energy world. This revolution in oil and gas exploration and extraction that’s taken place has made America less dependent on foreign oil and kept prices low.
California, however, is more dependent on foreign oil than at any time in its history and continues to be heavily affected by such events.
Two simple facts dramatically tell the story:
- In 2000, California imported 177 million barrels of foreign oil.
- In 2018, California imported 364 million barrels of foreign oil.
That’s an increase of 105.1% in 18 years; Californians are paying the highest prices in the nation at a time that the rest of America is enjoying lower gas prices as a result of the domestic exploration and extraction bonanza.
This situation not only creates pain at the pump for California drivers, it creates economic pain for our state’s businesses, small and large. And for California consumers, the increased energy costs are reflected in what they pay for what they need. From food to clothing to everything else that must move from point of production to the place where they are purchased, costs increase.
Since California represents approximately 13% of the U.S economy, any costs to the state could cause problems in the rest of the nation.
If California’s economy catches a cold, the national economy could get pneumonia. Put simply, California needs to get more of its oil and gas supplies domestically and not rely on oil and gas from unreliable and volatile regions like the Middle East.
In fact, the answer lies right under our feet. The vast deposits of oil and gas in the same type of shale formations have yielded new sources of reliable American energy in other parts of the country.
However, Governor Gavin Newsom’s November 2019 Executive Order places a moratorium on new permits for hydraulic fracturing. This means that, in all likelihood, this abundant natural resource and the key to unlocking the chains of California’s reliance on imported oil will remain beneath the surface.