How Fracking Will Change the American Economy

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:

    1. 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.


      1. 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.


        1. 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.


          1. 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.


          1. 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.

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          Reader Comments

          1. says

            Great article, and timely, too. The latest edition of Barron’s predicts that the low cost of natural gas will be a key part of drawing manufacturing jobs back to America. Next question: is it time to move to North Dakota?

          2. says

            I think the weakening of OPEC is the best thing on that list! A cheap alternative will force them to either become leaner or less corrupt thus lowering the price. May also give us a reason to get the hell out of that part of the world! Further reducing gov’t expenditures over there.

          3. says

            In my opinion, the fracking ballgame is still in the second inning. A parallel development is the massive increases in tar sands production coming on line in the next few years, mainly in Canada. I see shale fracking and bitumen extraction as a transformational event for the U.S. and Canada, similar to the North Sea development for Norway and the U.K.

          4. W. E. says

            The article helps (might) explain Walmart’s pronouncements of new found love for american manufacturing. I hope they actually embrace the model. I would question whether you think the IEA is a reliable resource (they’re NOT) – for planning our energy exporting success. The idea that carbon based energy can be treated like any other commodity, without accounting for the external costs of health, or environmental damage is fallacious and may not survive even so short a horizon as 2020. The presumption in all this disconnected, half considered (or half cocked, ill considered, or irresponsible) thinking is that you can treat those environmentally destructive commodities/products the same as pork bellies or bicycles.