High Energy Prices Have a Positive Effect on Domestic Energy Production

By Mark Seamon, Michigan State University Extension

While many Americans are spending more of their income on energy than in the past, they can be encouraged by increasing domestic energy production. For several decades the cost and convenience of fossil fuels has kept many alternative energy options from being commercialized. Now that the cost of fuel is higher, it has encouraged research and development of alternatives as well as domestic petroleum production.

According to the Michigan Energy Appraisal 2013-2014, crude oil production in the United States has reached the highest level in two decades in 2013 with Texas and North Dakota as the top producing states. In addition to the increased crude oil production are the domestic renewable fuels being produced in U.S. refineries. The U.S. Department of Energy states ethanol production creates jobs in rural areas where employment opportunities are needed. According to the Renewable Fuels Association, ethanol production in 2012 added more than 365,000 jobs across the country, $40.6 billion to the gross domestic product and $28.9 billion in household income.

Since most current ethanol production is based on corn as a feedstock, the majority of ethanol refineries are located near the farms that produce the corn. This means that a large portion of the U.S. ethanol capacity of 13.9 billion gallons is located in the Midwest or near the Corn Belt. Specifically, Michigan is home to five ethanol refineries that each produces about 50 million gallons of ethanol per year. These five facilities collectively use about 89 million bushels of corn to produce about 250 million gallons of ethanol and 750,000 tons of distillers dried grain each year. The current face value of this production is approximately $615 million. Additional economic analysis would show the related impact of this industry in the hundreds of millions per year. These impressive numbers are one part of the economic activity and recovery that Michigan needs as it pulls itself out of a recession.

As Americans continue to be large consumers of energy, the development and expansion of domestic supplies, both renewable and fossil fuels, are significant drivers in the economy. While long-term energy use and needs may offer new choices, we must wisely choose our current supplies.

Michigan State University and Michigan State University Extension continue to support the research and development of the alternative energy industry and will help to disseminate the important information that is gained and that can be useful to others.

Source:msu.edu