The United States at 250: what next for its energy sector?

The 4th of July this year marked the US’s 250th birthday. For almost exactly half that time, it has been the champion of global energy. With a bold shift toward next-generation technologies, the US has a historic opportunity to secure its leadership and ensure that it continues to outpace its rivals in the next energy century.

Great Britain led the first energy revolution, inventing the modern steam engine, fuelling it with coal, and building the Great Western steamship and the first railway network. But around 1900, America overtook Britain in coal production. The Civil War gave a huge impetus to the railroads.

Pioneering the modern IOC

It had already, in 1859, drilled the first real oil well, in Pennsylvania. By the turn of the century, it produced nearly half the world’s oil, level with Russia, and far ahead of anywhere else. John D. Rockefeller’s monopoly, Standard Oil, pioneered the modern integrated oil corporation (IOC). Americans enthusiastically adopted the new fuel; by the 1920s, the state of Kansas had more motor cars than the whole of France.

In the First World War, “the Allies floated to victory on a wave of oil”, as British foreign secretary Lord Curzon said – and most of that oil was extracted from the fields in Oklahoma, Texas and California. It would be the same story in the Second World War. Britain had taken the first steps in Middle Eastern oil, in Iran, but in the post-war period, American corporations – the forerunners of ExxonMobil and Chevron – led in the biggest prize of all, Saudi Arabia, were big players in Kuwait and Iraq, and later in Libya.

The glare of the new electric light

It was the same in electricity. In 1878, the chief engineer of the British Post Office, said, “The Americans have need of the telephone, but we do not. We have plenty of messenger boys.” F. Scott Fitzgerald’s The Great Gatsby, published in 1925, is suffused with the glare of the new electric light. The Tennessee Valley Authority and similar government infrastructure projects generated hydropower and electrified rural areas. Tennessee’s electricity in turn enriched the uranium for the first nuclear weapons. Incandescent bulbs, telephones, lifts and air-conditioning allowed the skyscraper boom, and the post-war migration to the American West and South.

American companies built the first major natural gas industry. They would then be at the forefront of offshore drilling, and subsequently deepwater. When in the early 2000s, the onshore US appeared moribund, decades of research paid off, leading to the shale boom – the combination of hydraulic fracturing and horizontal drilling – that again made America the world’s biggest hydrocarbon producer.

Setting up the IEA

The US’s unrivalled diplomatic and military power allowed it to externalise its energy security – corralling the industrialised nations into the International Energy Agency to counter OPEC in the 1970s, fighting to end Iraqi control of Kuwait in 1991, wielding its newfound oil and liquefied natural gas exports to blunt the Russian energy weapon after the 2022 invasion of Ukraine.

Its giant, integrated, transcontinental economy, its abundance of natural resources, and its fusion of research, entrepreneurship and government investment, made it an unbeatable power. It also helped the twenty-first century suite of innovations, with crucial contributions to solar photovoltaics, wind turbines, electric vehicles and lithium-ion batteries. The US did not invent all the key twentieth-century energy technologies – but it took the lead in commercialising and deploying them.

Rival across the Pacific

But as the nation reaches 250 years, are its fires going out? Its great rival across the Pacific now far outstrips it in energy generation and consumption. More worryingly for Washington, China has an unbeatable lead in manufacturing new technologies. It makes over 80% of the world’s solar panels, 70% of lithium-ion batteries, 70% of electric vehicles.

Beijing has translated this to strengths in innovation: batteries, floating wind turbines, high-efficiency coal power stations, ultra-high voltage electricity transmission. It dominates the supply chain for critical materials, mining and refining them itself either at home or through international ventures: famously, rare earths, but also lithium, nickel, graphite and obscurer materials such as antimony, germanium and gallium.

Continental energy economy

Most concerning, the US may have lost – or thrown away – some of its key advantages. It is the centre of a continental energy economy encompassing Canada and Mexico, but has weakened that integration with tariffs and diplomatic threats. It has abandoned government attempts to pick winners, in favour of trying to resuscitate coal, while paying companies billions not to build wind farms. American carmakers have given up their attempts to compete with China’s BYD, Geely and SAIC in electric vehicles, and retreated to the gas-guzzling hulks they can still build.

It has slashed and politicised scientific spending. Its immigration policies seem intended to drive away the world’s best scientific and entrepreneurial talent. It has done what it accused Communist countries of, allowing ideology to override intellect. The sudden hostility to renewables threatens to choke the electricity supply needed for the artificial intelligence build-out. And, like the UK, it seems to have completely lost the ability to build big projects, certainly to anything like on-time and budget.

Celebrating the bright spots

There are some bright spots. Petroleum heartland Texas also leads the nation in deploying solar and wind power. Favoured technologies, including carbon capture and nuclear power, have managed to hold on to tax credits. US venture capital has rediscovered the energy sector: innovation in small modular nuclear fission reactors, nuclear fusion and advanced geothermal could still yield breakthroughs.

But overall, the US faces a future where its main competitor dominates the energy technologies of the future. In turn, this threatens its ability to keep up in the world of tomorrow: robotics, autonomous vehicles, space and AI. At two hundred and fifty years old, the American energy economy looks like an ageing champion playing an outdated game.

• Robin M. Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis