The economic boom in oil and natural gas production resulting from advanced drilling technology lifted the US gross domestic product a full percentage point during the recent recession, says an IHS Global Insight expert, and it can continue to boost the economy for the foreseeable future.
John Larson, Vice President, Public Sector Consulting with IHS, said the fossil abundance unleashed by horizontal drilling and hydraulic fracturing also lowered energy prices enough in the recession that the average household saved $1,000 overall on what energy would have cost.
Speaking on a recent panel in Washington, DC, on Energy and the Economy, sponsored by the American Petroleum Institute’s Vote 4 Energy, Larson said the new production has fundamentally changed some national security calculations. For instance, he said, the US “clearly has more latitude” on issues like sanctions against Iran’s nuclear program because of increased domestic oil production.
Larson is co-author of the just-released IHS study, “America’s Energy Future: The Unconventional Oil and Gas Revolution and the US Economy,” which predicts the technologies will continue to lead industry resurgence, and continue to boost the US economy.
Reversal of Fortune
In the last five years, exploration companies have honed the technologies and driven down their costs, reversing 40 years of oil production decline and ending worries that the US would run out of natural gas, said Jack Gerard, President of API.
Because oil and gas require continued capital investment in the search for new wells, the IHS study concludes the industry will maintain a “relatively consistent share of employment” at about 6% of the workforce, at least to 2035, the end of the study period.
The technology, equipment and skills are all US-grown, the study says, so the new investment will be made largely within the US, not outsourced, as long as US energy and tax policies don’t deter it.
Sean McGarvey, President, Building and Construction Trades Dept., AFL-CIO, said the new oil and gas prospects are “a golden opportunity” to “put a floor under the middle class.”
He said “responsible use of fracking,” adhering to all laws and best practices, provides a “foundation for American economic development,” and the cooperation that has evolved between producers and skilled labor throughout the industry should be a “shining example” to other industries.
The new technologies are also changing the strategic picture for the chemical industry, said Owen Kean, Senior Director for Energy Policy, American Chemistry Council. Particularly with the new abundance of natural gas liquids used as feedstocks for plastics production, the chemical industry has been able to slash its US production costs.
Some $40 billion of new investment in chemicals manufacturing has been announced, Kean said. The prospect of cheaper fuel and feedstocks is producting “a remarkable turnaround” in other manufacturing industries as well, said Ross Eisenberg, Vice President, Energy and Resources Policy, National Association of Manufacturers.