ENERGY INDUSTRY. The U.S. Department of Energy recognizes and monitors eleven sources for the production of energy, including biomass, coal, electricity, geothermal energy, hydrogen, hydropower, natural gas, nuclear power, petroleum, solar power, and power wind. Not all of these sources constitute separate industries, but all contribute to the industries that dominate the supply of American energy. Chief among the major industries are those that generate power by means of fossil fuels.
The History of Fossil Fuels in the United States
The United States has always been rich in resources, but at the time of the Revolutionary War muscle power and fuel wood provided almost all of the nation's supply of energy. The land's vast stores of coal and petroleum were undiscovered. The country for the most part was energy poor, relying on water mills for local industry and sail power for its ships. Yet time would prove that America held more coal than any other fossil fuel resource, with deposits in thirty-eight of the fifty states. Still, the beginning decades of the nineteenth century saw the use of coal only in blast furnaces and coal-gas limited natural gas lighting. Experiments with battery-powered electric trains occurred in the 1840s and 1850s; however, these innovations, together with such inventions as the cotton gin and the mechanical reaper, only served to supplement human labor as the primary source of power. Not until the second half of the nineteenth century did the work output of machines surpass that of humans and work animals.
The first commercial U.S. coal production began near Richmond, Virginia, in 1748. Baltimore, Maryland, became the first city to light streets with gas made from coal in 1816. When the railroads extended into the plains and the mountains to the west, scant wood resources created a dependence on coal, which was more locally available and proved more efficient in steam locomotives. At the same time, the metals industry used increasing amounts of coal-produced coke to generate the iron and steel needed for the thousands of miles of track that led toward westward expansion, and coal became a primary resource during the latter half of the nineteenth century. With the beginning of the domestic coke industry in the later 1800s, coke soon replaced charcoal as the chief fuel for iron blast furnaces. In 1882, the first practical coal-fired electric generating station, developed by Thomas Edison, went into operation in New York City to supply electricity for household lights.
At this time, petroleum served only as a lighting fuel and as an ingredient in patent medicines. By the end of World War I coal still served the needs of 75 percent of the United States' total energy use. However, during this same interval, America began to shift to mechanical power, and the surge into the industrial age quadrupled the nation's consumption of energy between 1880 and 1918. Coal continued to feed much of this increase while electricity found a growing number of applications as well. In 1901, the discovery of the Spindletop Oil Field in Texas made petroleum a more attractive resource, particularly when mass-production automobiles reached several million by 1918.
The petrochemical industry became one of the most important of the energy businesses in just a few decades. The industry quickly grew in the 1920s and 1930s, as many of the major companies entered the field. These included—after the early success of Standard Oil of New Jersey (later Exxon) and I.G. Farben—Shell Oil, Union Carbide, and Dow. By 1936 competition was keen, and Monsanto established a petrochemical subsidiary, a move that prompted similar reactions by other large chemical companies. The petrochemical industry continued to grow through the 1940s and 1950s; and in the years following World War II petroleum replaced coal as the primary fuel in the United States. The railroad industry switched to diesel locomotives but suffered increasing losses to trucks that could run on gasoline and diesel fuel. The petroleum industry, which reached its stride in the mid-1970s, has created some of the largest chemical companies in the United States, including Exxon Chemical, OxyChem, and ARCO Chemical. As natural gas lost American favor as a fuel for light, that industry shifted to other markets, notably heating for household ranges and furnaces. The coal industry survived in large part by supplying fuel to electric utilities nationwide.
Michael Faraday invented the first electric motor in 1821, but not until 1878 did Edison Electric Light Company come into existence, followed the next year by the first commercial power station in San Francisco. At the start of the twentieth century, electric power was young but growing rapidly. Thomas Edison's work had led to the first commercial power plant for incandescent lighting and power in 1882. However, Edison's system used direct current, which could only deliver energy profitably to a limited area around the station. The work of engineers such as Nikola Tesla and Charles Steinmetz led to the successful commercialization of alternating current, which enabled transmission of high-voltage power over long distances.
Electrical power stations evolved from waterwheels to dams with a variety of turbines: reaction and hydraulic, fixed and variable blade, as well as reversible turbines that could pump water into elevated storage wells and then reverse back to generate power. In 1903, Charles Curtis pioneered the steam turbine generator, which generated 5,000 kilowatts from a plant that was the most powerful in the world at that time. Turbine generators required one-tenth the space and weighed only one-eighth as much as reciprocating engines of comparable output. Next came the world's first high-pressure steam plant, which further increased efficiency and brought substantial savings in fuel. In 1925, the Edgar Station in Boston became a model for high-pressure power plants worldwide.
Experiments continued to improve ways to adapt fuels for power generation, and the Oneida Street plant in Milwaukee began using pulverized coal in 1918. Adapting fuels to generate power was, and still is, an ongoing process. Increasing steam pressures also led the way to new materials such as chrome-molybdenum steel, which offered superior heat resistance in turbines. Power plants and improved fuel resources brought electricity to America. However, companies still focused most of their attention on urban areas, and only one in forty Americans enjoyed the benefits of electricity in the early twentieth century. Then, in 1935, the Rural Electric Administration was established, and President Franklin D. Roosevelt chose Morris Llewellyn Cooke, an engineer, to head the new agency with the charge of making electric power available across the nation. As a result, farmers soon replaced steam or gasoline power with electric motors that drove farm machinery and water pumps.
The early public works projects of the 1930s' Great Depression still provide today's electricity. Hoover Dam's hydroelectric generators, built between 1932 and 1935, supply nearly 1.5 million kilowatt-hours of electrical power per year to the people of the southwestern United States, and in 1933, the Tennessee Valley Authority was launched to bring power and flood relief to the Tennessee River basin. It currently operates numerous dams, eleven large coal-burning steam plants, and two nuclear plants in Alabama and Tennessee, producing more than 125 billion kilowatt-hours of electricity annually—about ninety times the power once generated in the region in 1933. By the 1990s, the entire country was linked into two giant grid systems, each serving a respective half of the country, and power transmission increased from 220 volts in the 1880s to 765,000 volts by 1999.
Energy Consumption in the United States
Throughout the twentieth century, fossil fuels provided most of the energy in the United States, far exceeding all other sources of energy together. Since colonial times, the United States enjoyed almost self-sufficiency in energy where supply and demand balanced until the late 1950s. Consumption began to surpass domestic production by the early 1970s, and this trend has continued since that time. In 2000 fossil fuels still accounted for 80 percent of total energy production and were valued at an estimated $148 billion. The United States at the beginning of the current millennium produced almost 72 quadrillion British thermal units (Btu) of energy and exported roughly four quadrillion Btu. Consumption totaled about 98 quadrillion Btu, and so still required imports of close to 29 quadrillion Btu, some nineteen times the level used in 1949.
The major cause of shortages results from insufficient petroleum. For example, in 1973, U.S. petroleum imports had reached 6.3 million barrels per day when Middle Eastern oil interests initiated an oil embargo. The embargo precipitated a sharp hike in oil prices followed by a two-year fall in petroleum imports. From 1979 to 1981 and again since 1986, the price of crude oil continued to climb significantly with the effect of suppressed imports. Petroleum imports to the United States in 2000 reached a yearly record level of 11 million barrels per day.
Despite the fact that electricity forms the basis of a major U.S. energy industry, it is nevertheless not an energy source per se. Electricity relies upon fossil fuels, hydroelectric power, and nuclear power for generation. Electric utilities have become large and complex in America, transmitted over long distances that span almost a half-million domestic miles. Most U.S. electricity derives from a combination of coal-burning and nuclear plants with slightly over 20 percent provided by natural gas, petroleum plants, and hydroelectric plants.
Over the years, Americans have learned to use energy more efficiently, as measured by the amount of energy used to produce a dollar's worth of gross domestic product. The result has been a 49 percent improvement between 1949 and 2000, and the amount of energy needed to generate a dollar of output has fallen from almost 21,000 Btu to just over 10,000 Btu—despite increased energy use brought on by a mounting population. The U.S. population grew 89 percent from 149 million people in 1949 to 281 million in 2000, and total energy consumption expanded by 208 percent from 32 quadrillion Btu to 98 quadrillion Btu. This translates to increased energy consumption per capita of 63 percent, from 215 million Btu in 1949 to 350 million Btu in 2000.
Energy continues to hold a key position in the economy of the United States, and energy spending keeps pace as well. Currently, American consumers spend more than half a trillion dollars on energy annually. Coal served as the leading source of energy for both residential and commercial consumers as late as 1951 but then declined rapidly. By contrast, natural gas grew strongly until 1972 and then stalled. Petroleum use grew at a slower, steadier pace but also peaked and declined around 1972. Only electricity, which was an incidental energy source in 1949, has expanded almost every year since that time, due largely to the expansion of electricity-driven appliances in U.S. households nationwide. For example, 99 percent of U.S. homes possessed a color television in 1997, and 47 percent had central air conditioning. Four-fifths of all households contained one refrigerator, and the rest had two or more. Other newer innovations such as microwave ovens and home computers have also increased residential energy use. In 1978, only 8 percent of U.S. households had a microwave, compared to 83 percent by 1997, and only 16 percent of households owned a personal computer compared to 35 percent by 1997. Home heating experienced equally large changes. One-third of all U.S. housing units used coal for heat in 1950, but only two-tenths of a percent used coal in 1999. During that same interval, home fuel oil lost half its market share (dropping from 22 percent to 10 percent), while natural gas and electricity gained as home-heating sources. Natural gas rose from one-fourth to one-half of all homes, and electricity gained, rising from only .6 percent in 1950 to 30 percent in 1999. Both electricity and natural gas have continued as the most common sources of energy used by commercial buildings as well.
Alternatives to Fossil Fuels
The America of the twentieth century has explored a number of alternatives to fossil fuels, and many of these energies are characterized as "renewable," since they do not rely on depleting finite stores of energy. In 1998, Congress increased funding for energy efficiency programs by $80 million for fiscal year 1999. That same year, President Bill Clinton issued an executive order calling for the federal government to reduce its energy use 35 percent by 2010 compared to 1985 levels—a measure that encourages alternative approaches to fossil fuel consumption.
One such alternative resource is biomass, a term that refers to plant-derived organic matter available from dedicated energy crops and trees, agricultural food and feed crops, agricultural crop wastes and residues, wood wastes and residues, aquatic plants, animal wastes, municipal wastes, and other waste materials. The resulting biopower technologies provide options for the generation of electricity in the United States, with ten gigawatts of installed capacity. Biomass fuels derive from liquid ethanol, methanol, biodiesel, Fischer-Tropsch diesel, and other gaseous fuels such as hydrogen and methane. Bio-based chemicals and materials produce so-called green chemicals, renewable plastics, natural fibers, and natural structural materials.
Another alternative industry has developed around the extraction of geothermal energy. Heat exists consistently beneath the earth's surface around the globe, where molten magma raises the temperature of hot, dry rock. This technology drills into the heated rock, injects cold water down one well to circulate through the hot, fractured rock, and then draws off the heated water from another well. In 1921, John D. Grant drilled a well into geysers just north of San Francisco, California, with the intention of generating electricity. Although this effort was unsuccessful, one year later Grant succeeded across the valley at a different site, creating the United States' first geothermal power plant.
The country's first large-scale geothermal plant for generating electricity began in 1960 at Grant's first geyser site, operated by Pacific Gas and Electric. By 2000, the plant had sixty-nine generating facilities in operation at eighteen resource sites across the country. Congress passed the Geothermal Steam Act in 1970, providing the secretary of the Interior with authority to lease public lands and other federal lands for geothermal exploration and development. By 1984, a twenty-megawatt plant began generating power at Utah's Roosevelt Hot Springs, a 1.3-megawatt binary power plant began operation in Nevada, and the Heber dual-flash power plant went online in the Imperial Valley of California with a fifty-megawatt facility. In 1994, the Department of Energy created two industry/government collaborative efforts to promote geothermal energy that reduces greenhouse gases, for both electric power generation and the accelerated use of geothermal heat pumps. In 2000, the government initiated its "GeoPowering the West" program to encourage research and development of geothermal resources in the
western United States, with an initial group of twenty-one partnerships funded to develop new technologies.
The Atomic Energy Act of 1954 gave the civilian nuclear energy program workable access to nuclear technology, and the following year, the Atomic Energy Commission announced a cooperative program between government and industry to develop nuclear power plants. Arco, Idaho, was the first U.S. town powered by nuclear energy by using an experimental boiling water reactor. In 1957, the first power was generated by the Sodium Reactor Experiment, a civilian nuclear unit at Santa Susana, California. That same year, Congress enacted the Price-Anderson Act, designed to protect the public, utilities, and contractors financially in the event of an accident at a nuclear power plant. Also, the first full-scale nuclear power plant went into service in Shippingport, Pennsylvania.
In 1963 the Jersey Central Power and Light Company created the first nuclear plant designed as an economical alternative to a fossil-fuel plant. Following the Organization of Petroleum Exporting Countries' (OPEC) oil embargo in 1973, United States utilities ordered forty-one nuclear power plants. By 1984, nuclear power over-took hydropower to become the second-largest source of electricity, after coal. Two decades after the 1973 embargo, 109 nuclear power plants operated in the United States and provided about one-fifth of the nation's electricity. In 1996, the Nuclear Regulatory Commission granted the Tennessee Valley Authority a full-power license for its Watts Bar 1 nuclear power plant, bringing the number of operating nuclear units in the United States to 110. In 2000, the Nuclear Regulatory Commission issued the first license renewal to Constellation Energy's Calvert Cliffs Nuclear Power Plant, allowing an additional twenty years of operation. The Nuclear Regulatory Commission also approved a twenty-year extension to the operating license of Duke Energy's three-unit Oconee Nuclear Station.
A number of other alternatives to fossil fuel have undergone research and development, including wind and solar power. These technologies exist primarily in the hands of the private sector and do not constitute industries in the same sense that petrochemicals or coal, for example, have become part of the national energy resources. Rather, they contribute to individuals' power needs and in some instances, such as California's wind power stations, have contributed to the larger electrical grid.
The Future of U.S. Energy Use
The Energy Information Administration has offered certain projections of American energy use in its Annual Energy Outlook 2001, which suggests likely consumption through 2020 barring unexpected events like the 1973 oil embargo. According to these projections, energy prices are expected to increase slowly for petroleum and natural gas and may actually decline for coal and electricity. If these trends bear out, then U.S. total consumption could reach 127 quadrillion Btu by 2020, which is 29 percent higher than in 2000. The report also suggests that consumption in all areas will continue to increase, particularly in transportation because of an expected increase in travel as well as greater needs for freight carriers. Although Americans are using energy more efficiently, a higher demand for energy services will likely raise energy use per capita slightly between 2000 and 2020. Energy intensity—that is, the energy use per dollar of gross domestic product—has declined since 1970 and the projection continues to support that trend.
Long-used oil fields in the United States will produce less at the same time that America experiences a rising demand for petroleum. Imports will make up the difference, a rise from the 52 percent used in 2000 to 64 percent by 2020. Although domestic natural gas production has risen 2.1 percent each year, increasing demand will also require more gas imports. Output coal-field production within the United States will also increase to match expanding domestic demands. Renewable energy sources will likely grow by only 1.1 percent each year. Growth in production of energy from renewable sources is expected to average about 1.1 percent per year, whereas nuclear power facilities will decline at the same rate. With no strong measures to reduce emissions of carbon dioxide yet in sight, the greater use of fossil fuels, together with a relatively slow market in renewable energy sources, may well lead to higher emissions. As a result, emissions related to energy will exceed 2 billion metric tons of carbon (7.5 billion tons of gas) in 2020, up 33 percent from 2000.
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"Energy Industry." Dictionary of American History. . Encyclopedia.com. (August 17, 2017). http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/energy-industry
"Energy Industry." Dictionary of American History. . Retrieved August 17, 2017 from Encyclopedia.com: http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/energy-industry
The energy industry has evolved with the industrialization of the world economy and rising consumer incomes. Many sources of energy have been important in human history, including dung, timber, and whale oil. The modern energy industry, however, is focused primarily on coal, crude oil, natural gas, and electricity.
As reported in the BP Statistical Review of World Energy, in 2005 oil accounted for 36.4 percent of total world energy consumption, followed by coal at 27.8 percent, natural gas at 23.5 percent, hydroelectricity at 6.4 percent, and nuclear energy at 5.9 percent. The composition of energy consumption differs remarkably across regions due to the relative costs of consuming differing energy sources, as determined by the relative abundance of domestic energy supplies and the stringency of environmental regulation. In North America oil accounts for 40.4 percent of total energy consumption, followed by natural gas at 24.9 percent, coal at 21.9 percent, nuclear energy at 7.5 percent, and hydroelectricity at 5.3 percent. This differs substantially from the composition of total energy consumption in the Asia-Pacific region, for example, where coal is the major energy source accounting for 48.1 percent, followed by oil at 32.6 percent, natural gas at 10.7 percent, hydroelectricity at 4.9 percent, and nuclear energy at 3.6 percent. China and India account for 79 percent of all coal consumption in the Asia-Pacific region and 44 percent of total world coal consumption.
Crude oil has evolved from an industry controlled by a small number of vertically integrated companies in which there were few market-based transactions to an industry in which crude oil is a commodity traded on organized exchanges—such as the New York Mercantile Exchange futures contract, which began trading in 1983—as well as on over-the-counter spot markets (Verleger 1982). The distinguishing feature of the crude oil market since 1973 is the resource cartel known as OPEC, the Organization of Petroleum Exporting Countries. The large oil price increases of 1973 and 1979 are generally attributed to the exercise of market power by OPEC, though there are several alternative hypotheses about OPEC’s behavior (Gately 1984). James M. Griffin (1985) and Clifton T. Jones (1990) provide direct empirical evidence on OPEC behavior. Their empirical analyses suggest that OPEC engaged in cartel behavior during periods of rising as well as falling prices. The empirical evidence is also consistent with competitive behavior on the part of non-OPEC producers of crude oil.
The recent restructuring of natural gas and electricity industries around the world is based on the separation of the energy commodity from its transmission. These energy industries had been organized as natural monopolies in which a single regulated firm provided service to all customers. Under this organization, merchant transporters purchased energy upstream and resold it downstream. The move toward a system based on a property right in transportation has allowed for multiple owners and promoted a more competitive organization of these energy markets. Through use of transportation rights and contracts nearly any organizational structure can be created for pipelines and electricity transmission, including all the historical forms of merchant carriage, common carriage, contract carriage, and vertical integration.
When a property right in transportation is issued, for example by a pipeline, the pipeline becomes a supplier of transportation rights rather than a supplier of transportation. The holders of the rights are the ones who supply transportation and this supply is allocated through the market (De Vany and Walls 1994c; Smith et al. 1988). Property rights in transportation capacity have decentralized control, permitting users to acquire transportation interests through purchase or by contract.
Before open access gas transmission there was no competitive market for natural gas (Smith et al. 1988; Teece 1990; De Vany and Walls 1994a; Michaels 1993). Regulators organized the industry as separated monopolies. Transportation and gas were bundled together and buyers and sellers did not have direct access to one another. As a result, gas purchases were made under longterm contract (Mulherin 1986a; Mulherin 1986b). These regulatory policies balkanized the natural gas industry and disconnected the pipeline grid. Even though, over time, a vast grid of pipelines developed to serve users, its competitive power was nullified because the grid was disconnected and gas flows were fixed.
As a result of open access transmission, much pipeline capacity has been reallocated from the pipelines to their customers. In the U.S. interstate gas market, control of transportation has been decentralized, with 1,400 local distributors holding transportation rights on twenty-one major interstate pipelines (Bradley 1991). Open access transmission brought forth new markets where none had existed; over fifty gas spot markets now exist at scattered points throughout the pipeline grid (De Vany and Walls 1994c) and they have been extremely successful in disciplining prices and allocating natural gas (De Vany and Walls 1994b; De Vany and Walls 1996).
The electricity industry in the United States—and in many other countries around the world—is in the midst of fundamental change as a result of regulatory reform aimed at restructuring the industry, in order to introduce and increase the intensity of competition in wholesale and retail markets. Contrary to the situation in a number of other countries, in the United States restructuring efforts have been hampered by divided regulatory jurisdictions. (See, for example, the discussion in Brennan  for legal and economic perspectives on the roles of different levels of government in a federation.) The federal government has jurisdiction over wholesale electricity sales and movement because electricity at the wholesale level crosses state borders and therefore qualifies as interstate commerce. (In addition to interstate trade, there is substantial Canada–U.S. trade in electricity that adds another level of institutional complexity. See Feldberg and Jenkins  for a brief legal and institutional analysis of this issue.) Retail markets, on the other hand, are under individual states’ jurisdiction. This historical fact has led to a patchwork of different rules and regulations governing electricity markets.
Currently, according to a 2002 U.S. General Accounting Office report, twenty-four states and the District of Columbia have enacted legislation or issued regulatory orders to open their retail markets to competition. However, of these, seven states have either delayed or suspended implementation of restructuring and the remaining twenty-six states have not yet taken any steps to introduce competition at the retail level. The result of this divided jurisdiction and diverse approaches to restructuring has been the introduction of a great deal of regulatory uncertainty into the market. This uncertainty is having an impact on the development of new generation facilities.
One key feature of restructuring has been a move away from centralized planning of new generating capacity and transmission upgrades by unities and state-level public utilities commissions. Instead, a decentralized process of development and investment decisions—largely by non-utility companies—is evolving. The development plans of these companies are not subject to approval by public utilities commissions nor are they coordinated by a central body. Because the development process can be long, regulatory and market conditions may change considerably, causing developers to reassess the relative merits of each of their projects during development, in response to both volatile energy prices and long and uncertain state and federal approval processes.
Power plant investment is higher in states that have restructured electricity markets than in states that have taken no restructuring actions (Walls, Rusco, and Ludwigson, in press). Development is also more prevalent in areas of the country with a robust wholesale market infrastructure. Ownership of new power plants also differs across states, with non-utility companies accounting for the bulk of new power plants in states taking restructuring actions, while utilities still have a strong or dominant role in new development in states that have not restructured at all. States’ decisions to implement retail competition result in more investment in new power plants.
In 2005 there were 440 operating nuclear power plants in thirty-one countries and these accounted for 16 percent of the world’s electricity supply (World Nuclear Association 2005). However, with few exceptions, there has been no new construction of nuclear power plants in the restructured electricity markets. Nuclear power plants have been plagued by problems of public acceptance and waste disposal. There are also important regulatory and financial issues that act as disincentives to the development of nuclear generating plants in liberalized power markets. Nuclear power plants are unattractive to for-profit electricity generation companies due to the extremely large up-front cost associated with nuclear construction and the large correlation between electricity prices and fossil fuel prices. Merchant power producers are interested in locking in the spread between input and output prices. When power prices fall, fuel input prices also fall for conventional fossil-fueled power plants. However, nuclear plants are extremely unprofitable under this scenario, leading to the decision of most private investors to not choose nuclear power units (Roques et al. 2006).
James Hamilton (1983) presented the first systematic analysis of the effects of oil price shocks on the macro-economy. His research suggested that the two large price increases in crude oil in the 1970s had a significant real economic impact, lowering economic growth in the United States. However, subsequent empirical analysis has found that this relationship may in fact be asymmetric; Knut Anton Mork (1989) found that shocks increasing oil prices were associated with lower economic growth, but that oil price reductions has no impact on real economic activity. More recent analysis that includes the oil price shocks associated with the Iraqi invasion of Kuwait find that the relationship between energy and macroeconomic activity is very weak, even allowing for asymmetries (Hooker 2002; Barsky and Kilian 2004).
Working conditions and salaries in the energy industries largely reflect the overall labor market conditions for any particular time period and geographic location under consideration. However, one notable difference between the energy industry and most manufacturing or service industries is the requirement that a combination of technical and blue-collar workers be physically present at the specific location where energy resources are extracted from the earth. In the United States—home to most of the world’s multinational energy companies and to a large pool of skilled and unskilled labor—this historically led to the formation of communities in the locations where energy supplies were discovered. In other countries where large multinational energy companies operate—such as Nigeria and Russia—a combination of domestic blue-collar migrant workers and expatriate technical workers are employed in energy extraction.
SEE ALSO Energy; Industry; Petroleum Industry; Solar Energy
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W. David Walls
"Energy Industry." International Encyclopedia of the Social Sciences. . Encyclopedia.com. (August 17, 2017). http://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/energy-industry
"Energy Industry." International Encyclopedia of the Social Sciences. . Retrieved August 17, 2017 from Encyclopedia.com: http://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/energy-industry