U.S. oil reserves increased until 1970, then began to decline.
In the Colonial era the energy policy of the United States was for free use of standing timber for heating and industry. In the 19th century, new emphasis was placed on access to coal and its use for transport, heating and industry. Whales were rendered into lamp oil. Later, coal gas was fractionated for use as lighting and town gas. Natural gas was first used in America for lighting in 1816., it has grown in importance for use in homes, industry, and power plants, but natural gas production reached its U.S. peak in 1973, and the price has risen significantly since then.
Coal provided the bulk of the US energy needs well into the 20th century. Most urban homes had a coal bin and a coal fired furnace. Over the years these were replaced with oil furnaces, not because of it being cheaper but because it was easier and safer. Coal remains far cheaper than oil. The biggest use of oil has come from the development of the automobile.
Oil became increasingly important to the United States, and, from the early 1940s, the U.S. government and oil industry entered into a mutually beneficial collaboration to control global oil resources. By 1950, oil consumption exceeded that of coal. The abundance of oil in California, Texas, Oklahoma, as well as in Canada and Mexico, coupled with its low cost, ease of transportation, high energy density, and use in internal combustion engines, lead to its increasing use.
Following World War II, oil heating boilers took over from coal burners along the Eastern Seaboard; diesel locomotives took over from coal-fired steam engines under dieselisation; oil-fired electricity plants were built; petroleum-burning buses replaced electric streetcars in a GM driven conspiracy, for which they were found guilty, and citizens bought gasoline powered cars. Interstate Highways helped make cars the major means of personal transportation. As oil imports increased, US foreign policy was inexorably drawn into Middle East politics, supporting oil-producing Saudi Arabia and patrolling the sea lanes of the Persian Gulf.
Hydroelectricity was the basis of Nikola Tesla's introduction of the U.S. electricity grid, starting at Niagara Falls, NY in 1883. Electricity generated by major dams like the
Jensen Dam, TVA Project, Grand Coulee Dam and Hoover Dam still produce some of the lowest-priced ($0.08/kWh), clean electricity in America. Rural electrification strung power lines to many more areas.
Utilities have their rates set to earn a revenue stream that provides them with a constant 10% – 13% rate of return based on operating costs. Increases or decreases of the operating costs of electricity production are passed directly through to the consumers.
The federal government provided substantially larger subsidies to fossil fuels than to renewables in the 2002–2008 period. Subsidies to fossil fuels totaled approximately $72 billion over the study period, representing a direct cost to taxpayers. Subsidies for renewable fuels, totaled $29 billion over the same period.
In some cases, the U.S. has used its energy policy as a means to pursue other international goals.
Richard Heinberg, a professor from Santa Rosa, California argues that a declassified CIA document shows that the U.S. used oil prices as leverage against the economy of the Soviet Union. Specifically, he argues that the U.S. intentionally worked with Saudi Arabia during the Reagan administration to keep oil prices low, thus decreasing the purchasing power of the Soviet Union's petroleum export industry. When combined with other U.S. efforts to drain Soviet resources, this was eventually a major cause in the dissolution of the Soviet Union.