Key Takeaways:
- Results of elections and political agendas are important, but in America’s capitalist, free market economy, the private sector and the consumer are the dominant forces that drive economic growth.
- The energy sector is a prime example of private sector innovation in response to consumer demand driving growth.
- U.S. energy production has experienced a significant and unabated expansion since 2010 regardless of political party in power.
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Presidential elections can have important impacts on our society, especially with respect to the social fabric and geopolitical issues. However, U.S. presidential elections typically have little long-term economic and market impact.
While it is true that the executive branch can create headwinds or tailwinds directed at certain industries through executive orders and regulation, these moves are typically of marginal overall impact despite the headlines they may generate. The U.S. energy sector is a timely example. Consider that despite that the current administration’s moves to limit the energy sector, the U.S. is producing more energy than ever before. With the shale revolution driven by private industry and not by government mandate, natural gas and oil production are booming. Never has the U.S. energy sector been so productive, even making the U.S. an energy exporter. All this despite the supposed headwinds created by the federal government.
As the following graph illustrates, energy consumption (demand) significantly outstripped U.S. energy production (supply) for years until the U.S. energy sector figured out how to significantly increase production through the development of new technologies. Along with the increase in supply to meet and then exceed demand, energy exports also increased while imports decreased. This is a real-life example of how the theory behind capitalism and the open market works successfully.
Note that energy production really took off in 2010 and has remained elevated regardless of Presidential administration. Again, this improvement was not the result of some government edict. Rather, some really smart and hard-working professionals in the energy sector created new fracking-related technologies to make our resources more productive. This can be seen in the increases natural gas and crude oil production, which are up 70% and 112% in quadrillion British thermal units (BTUs) between 2010 and 2022, the most recent data available from the U.S. Energy Information Administration.
While governmental policies do matter, they do not happen in a vacuum. Over time, this complexity has worked to stabilize the U.S. system. In our view, the founding fathers succeeded in creating a framework that can withstand the tests of time and challenges of change.
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