Since oil was first discovered near Titusville, Pennsylvania over 100 years ago, petroleum has become arguably the most essential natural resource for the United State’s economy past and present. From its development as an energy source, fuel for vehicles, and as a key component in everything from plastics and tires to football cleats and paintbrushes, petroleum makes up key components in multiple industries across the country. While petroleum does have its niche uses for electricity, its versatility for the U.S. economy largely lies elsewhere.  

As a share of the 2020 energy mix at utility scale, petroleum only produced 0.4 percent of electricity for the entire United States. One state, however, does have a heavy dependence on petroleum for electricity. Due to the state being a chain of islands in the Pacific, Hawaii is dependent on imports of different fuels to satisfy its energy needs. The Hawaiian economy itself is not very energy intensive due to the massive tourist sector, but the combination of large military bases and heavy air traffic to and from the island mean a large amount of petroleum is used by the transportation sector. Hawaii often has the highest electricity retail price in the U.S. due to its dependence on expensive importing of petroleum, but also has consistently ranked in the bottom five of U.S. states in terms of total energy consumption. In short, petroleum provides mass transit to, from, and between Hawaii’s islands for the U.S. military, commercial airline, and maritime sectors; with transportation accounting for 56.6 percent of the state’s energy consumption and petroleum-fired power generation accounting for 66 percent of its energy mix.   

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Outside of Hawaii, petroleum is not widely harnessed for electricity generation. Petroleum mainly fuels the transportation sector through gasoline, diesel fuel, jet fuel, or a number of other petroleum-based products. While the vast majority of oil and its refined products power our vehicles, petroleum forms a key component in many petrochemical manufacturing processes. Plastic products like water bottles and prosthetic limbs, cosmetics like perfume and shampoo, and even synthetic textile products like North Face jackets and high performance athletic wear all are derived from petroleum. 

This snapshot of crucial materials derived from petroleum showcases how versatile oil is, but also how complex the energy transition away from oil and other fossil fuels will be if we simply close off development and leave it in the ground. Oil companies have slowly begun to increase the amount of crude involved in material manufacturing, as projections show demand in the transportation sector for oil peaking in 2025. Petrochemicals produced in the U.S. are largely derived from natural gas, but oil still plays a crucial role in the manufacturing of resins and other synthetic products. One of the most widespread petroleum products is the plastic polyethylene, which comes in over 10,000 different types depending on what product it is used to construct. 

One of these key uses for polyethylene is in the medical and pharmaceutical industries. Polyethylene in the medical industry helps keep equipment sterile and makes up most disposable syringes, while also being a component in implants and artificial joints. During the Covid-19 pandemic, polyethylene and other petroleum based medical products have made up the vast majority of products, including ventilator masks, tubing, and other equipment that has helped save countless lives. Crucially, the most common usage for petroleum products in the medical industry is in capsules or coatings for medications. Capsules for time-release drugs are constructed to administer specific amounts of medication after being ingested, which is made possible by the oil-derived capsules that naturally dissolve inside the body. Finally, oil products make up the majority of over the counter skin treatment gels, ointments, and other topical medicines used for everything from acne treatment to moisturizers.  

Due to petroleum’s versatility, it has become a key component in virtually every industry worldwide. Viewing oil and gas solely as energy resources is too limiting of their importance. While they are highly energy dense and practical for generating heat, electricity, and fueling vehicles, oil and gas products very literally make modern life possible even excluding their energy applications.

An energy transition that shuts off oil and gas development will force petrochemical manufacturers to not only power their plants with renewable energy, but also search for suitable replacement to petroleum-derived products. In some cases, this may be costly, in others it may be impractical. Petroleum’s importance in pivotal industries and manufacturing processes cannot be understated, as the U.S. continues its renewable industry transition. By recognizing that gasoline and other petroleum fuels are not the sole sector that benefits immensely from oil and gas development, policymakers must not shape energy policy to favor renewable and low-emission sources by shutting off supply chains to the materials we rely on for health, safety, medicine, commerce, and travel. Fossil resources are more than fuels, and shutting down exploration and production, pipeline transports, and other petroleum industries in the name of progress for clean energy is more than shortsighted.   


Want to learn more about energy resources? Read our petroleum brief here.


Written by Roy Mathews, Public Policy Associate


The Alliance for Innovation and Infrastructure (Aii) is an independent, national research and educational organization. An innovative think tank, Aii explores the intersection of economics, law, and public policy in the areas of climate, damage prevention, energy, infrastructure, innovation, technology, and transportation.