The United States is now the world’s largest combined producer of oil and gas, as technological innovation has helped to dramatically boost U.S. production in the past decade. But falling energy prices between June 2014 and this past March year have taken the steam out of the energy sector, which had been creating high-paying jobs during an otherwise anemic period of economic growth. Energy companies have closed down drilling rigs and cut thousands of jobs. Production has not decreased, however, because companies are finding ways to make remaining rigs more efficient. And falling oil and gas prices are good news for energy users, such as steel mills, airlines and consumers. Nevertheless, it appears the consumers so far are using this energy dividend to pay off debt and to save rather than to increase spending.

Native Americans gather on the steps of the South Dakota statehouse in Pierre on Oct. 13, 2014, to protest the proposed Keystone XL pipeline. The controversial pipeline would transport up to 830,000 barrels per day of mostly heavy crude oil from Canadian oil sands to Gulf Coast refineries. (Getty Images/Andrew Burton)

In 2012, the United States surpassed Russia as the world’s largest combined producer of oil and gas, a state of affairs that U.S. Energy Secretary Ernest Moniz recently labeled an “energy revolution.” 1 That revolution is largely the result of technological innovation. In 2003, U.S. energy companies united two existing technologies for the first time — horizontal drilling and hydraulic fracking — to release gas trapped in shale formations that previously was inaccessible or uneconomical to retrieve. 2 Since then, U.S. natural gas production has increased by nearly a third. 3 Then in about 2010 energy companies began seriously applying the two technologies to extract oil from shale, creating a boom that has pushed up U.S. crude oil production by nearly 60 percent to levels not seen in 30 years. 4

The increase in U.S. production has helped to drive down prices, first for natural gas and most recently, and dramatically, for oil. 5 For example, the price of the benchmark West Texas Intermediate crude fell 59 percent from its 2014 high last June to $43.46 a barrel in mid-March. 6 In past instances of significant oil price fluctuations, Saudi Arabia and other Gulf nations have adjusted their oil production to stabilize prices. But this time, they have chosen not to act. Energy historian Daniel Yergin said they fear that reducing production to support higher oil prices could lead to a permanent loss of market share to the United States, Russia, Brazil and their regional rivals Iraq and Iran. 7