It might be one of the most controversial issues in energy, but it’s having a profound impact on American energy production. Hydraulic fracturing is a new technology that allows us to search for oil in places we’ve never looked before, and make use of natural gas and oil deposits that were never before economical.
Fracking will have a lasting impact on the United States and the economy as a whole. Here’s how:
- Transportation fuel costs will stabilize – Old methods for drilling oil and natural gas yielded small amounts of energy over a very long period of time. A single well could operate for decades, slowly providing less and less oil. That meant oil and gas prices were subject to booms and busts based on supply. If OPEC cut production, production increases elsewhere could take years to replace the lost supply. Hydraulic fracturing changes the way the industry can respond to demand. A non-conventional well can produce for years, but a typical well will lose 50% of its daily production each year.
- U.S. will become a cheap energy leader – The United States will become a leader in low cost energy. In the Permian basin, companies find it possible to bring up oil and natural gas with prices as low as $70 a barrel. The United States’ infrastructure gives it a competitive advantage; other countries like China have their own resources which could be tapped with fracking, but they lack the infrastructure necessary to drill and ship gas. The U.S. And Canada could soon be the biggest exporters of gas to Asia as new facilities are built to ship American and Canadian gas overseas. Compare our $3 natural gas to double digit prices in Asia and Europe.
- Oil brings high-tech job growth – Fracking supports as many as 1.7 million jobs, a number which should double by 2035, according to Bloomberg. For the most part, jobs in oil drilling are lucrative, with many earning six-figure salaries only a few years into their career. The price is high – workers often live in remote areas of Texas or North Dakota – but hands-on fracking jobs require very little education compared to other six-figure careers.
- Weakening OPEC – OPEC’s ability to set energy prices by changing supply is history. The United States now produces enough energy to meet 83% of domestic consumption, which is the highest level since gas prices plummeted as part of another oil boom in the United States in the early 1990s. The IEA expects the United States to become a net exporter by 2020.
- Manufacturing revival – Manufacturing is resource intensive, with cheap energy being a key input in modern manufacturing processes. Seeing as the United States will lead in cheap energy, is home to plenty of cheap real estate, and provides infrastructure necessary to move goods all around the country, manufacturing jobs are expected to be insourced from areas that previously gained outsourced American jobs. One firm expects as many as 5 million new jobs by 2020.
The benefits of fracking go well beyond cheap energy. As the most important input to daily life, having the energy advantage gives the United States a huge advantage in competing internationally. As controversial as it might be, and as new as it is, hydraulic fracturing promises to completely change the direction of the American economy.