Commentary Magazine


Topic: shale

The Oil and Gas Boom Booms On

The domestic oil and gas boom is rolling on, with no end of positive effects for the American economy. At the official end of the recession, in June 2009, we pumped 158.266 million barrels of oil that month. In November 2013, we pumped 233.051 million barrels, a 47.2 percent increase. This has led directly to much less imported oil, a much improved balance of trade, and a less influential OPEC.

But as Investor’s Business Daily points out, the economic benefits of the energy boom spread far beyond the oil industry into the economy as a whole. Jobs in the oil and gas fields are up about 40 percent since the end of the recession, and the ten states that are seeing substantially rising hydrocarbon production all have had job growth above the national average. And as IBD explains, “These jobs, moreover, are ‘sticky’ — anchored in the local economy and ranging from information services to training, health care, housing, education and related manufacturing.” North Dakota, battening on the rich oil resources of the Bakken Shield, has the lowest unemployment rate in the country.

And low-cost energy is attracting foreign investment. “The boom has also attracted a similar scale of new foreign direct investment,” IBD reports. “Because of low-cost energy abundance, 100 factories are set to come on line by 2017. When all are up and running, another $300 billion will be pumped into GDP and 1 million more jobs created.”

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The domestic oil and gas boom is rolling on, with no end of positive effects for the American economy. At the official end of the recession, in June 2009, we pumped 158.266 million barrels of oil that month. In November 2013, we pumped 233.051 million barrels, a 47.2 percent increase. This has led directly to much less imported oil, a much improved balance of trade, and a less influential OPEC.

But as Investor’s Business Daily points out, the economic benefits of the energy boom spread far beyond the oil industry into the economy as a whole. Jobs in the oil and gas fields are up about 40 percent since the end of the recession, and the ten states that are seeing substantially rising hydrocarbon production all have had job growth above the national average. And as IBD explains, “These jobs, moreover, are ‘sticky’ — anchored in the local economy and ranging from information services to training, health care, housing, education and related manufacturing.” North Dakota, battening on the rich oil resources of the Bakken Shield, has the lowest unemployment rate in the country.

And low-cost energy is attracting foreign investment. “The boom has also attracted a similar scale of new foreign direct investment,” IBD reports. “Because of low-cost energy abundance, 100 factories are set to come on line by 2017. When all are up and running, another $300 billion will be pumped into GDP and 1 million more jobs created.”

The Obama administration, naturally, is taking entirely undeserved credit for this, for its policies have slowed the oil and gas boom to the extent possible. Other Democrats, with the president’s blessing, have also been impeding oil and gas drilling. While Pennsylvania has been exploiting the vast gas reserves of the Marcellus shale, Governor Andrew Cuomo in neighboring New York has decided to let deeply depressed upstate go on being deeply depressed rather than drill into the Marcellus shale and, Cuomo proclaims, risk ground water contamination. This is, of course, nonsense. Fracking began in 1947 and hundreds of thousands of wells have been drilled in the last 67 years using the technique. There has not been a single case of documented ground water contamination from any of those wells.

Domestically, President Obama has, at best, slow walked the best and most obvious means of increasing American economic prosperity and employment. Internationally, he has worked to limit his country’s influence and prestige. I can think of no other example in all human history of a head of state whose policies were designed to weaken the country he headed.

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Cuomo Puts First Things First: Re-election

The technologies of “fracking,” and horizontal drilling are rapidly transforming the world’s energy situation. These technologies make it possible to tap into vast deposits of both natural gas and oil in shale layers around the world. The United States is particularly rich in such deposits. American domestic energy production has been rising rapidly (and imports falling commensurately), while our carbon emissions have been falling to the lowest level since 1992, because natural gas is increasingly replacing coal as a fuel in electric generating plants.

And since energy is one of the most important of economic inputs, it is transforming the world’s geopolitics as well, much to the benefit of the United States and many of its allies (such as Canada and Australia) and much to the detriment of such countries as Russia, the Gulf States of the Middle East, and Venezuela.

Naturally, the environmental movement is outraged at these developments.

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The technologies of “fracking,” and horizontal drilling are rapidly transforming the world’s energy situation. These technologies make it possible to tap into vast deposits of both natural gas and oil in shale layers around the world. The United States is particularly rich in such deposits. American domestic energy production has been rising rapidly (and imports falling commensurately), while our carbon emissions have been falling to the lowest level since 1992, because natural gas is increasingly replacing coal as a fuel in electric generating plants.

And since energy is one of the most important of economic inputs, it is transforming the world’s geopolitics as well, much to the benefit of the United States and many of its allies (such as Canada and Australia) and much to the detriment of such countries as Russia, the Gulf States of the Middle East, and Venezuela.

Naturally, the environmental movement is outraged at these developments.

This misnamed movement (it’s actually an anti-commerce movement with more than a tinge of misanthropy about it) is populated almost entirely by members of the upper middle class with comfortable six- and seven-figure incomes. They don’t care what energy costs because even if the costs doubled, it would have no impact whatever on their own standard of living. Their consumption of Chablis and Brie would not have to be cut back.

The environmental movement has disproportionate influence on Democratic politics and if you’d like a perfect example of that, just consider Governor Andrew Cuomo of New York.

The Marcellus shale is a vast geologic layer underlying much of upstate New York, Pennsylvania, West Virginia, Maryland and Ohio. It is enormously rich in natural gas that can be accessed with the new technology. Pennsylvania has been exploiting this unexpected bounty with enthusiasm (Power Line has a neat little interactive map showing this). And that has had enormously positive effects on Pennsylvania’s economy and its government’s tax revenues.

The area of New York State underlain by the Marcellus shale has been in an economic depression for decades as its once booming industrial cities, such as Buffalo, Rochester, and Syracuse, have seen industry flee to areas with better weather, right-to-work laws, and fewer regulations. You would think that the economic possibilities of the Marcellus shale being demonstrated so visibly in the state immediately to the south would cause New York to move quickly to bring increased jobs and mineral royalties to western New York and greatly increased tax revenue to the entire state.

You’d be wrong. The environmentalists are in full Chicken-Little mode (ground-water contamination! fuel spills! greenhouse gases! children refusing to eat their vegetables!) and Governor Cuomo pathetically cowers before them. He (and his predecessor) have been dragging their feet in the time-honored way of politicians, ordering study after study and postponing decisions until the studies are in and evaluated. If the study doesn’t produce the data they want, the study is suppressed. Only when a report was “obtained by the New York Times from an expert who did not believe it should be kept secret,” did the people of New York State get to learn that the state Health Department regards gas drilling to be safe.

Of course, Pennsylvania has been an ongoing experiment for the last six years and more as to the safety of gas drilling. If there have been any disasters in the Keystone State with regard to the drilling, recovery, and transportation of gas from the Marcellus shale, it has gone unreported.

The reason Governor Cuomo has, effectively, told upstate New York to drop dead, is, of course, that Democrats running statewide for office win downstate, in New York City and its suburbs. Upstate is Republican country.

So Governor Cuomo is simply being concerned with what is most important to Governor Cuomo: his re-election. The welfare and prosperity of the State of New York come a long way second.

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The Free Market Is Crushing CO2 Emissions

Anti-CO2 activists may have to find something else to give their lives meaning. The AP reports that “the amount of carbon dioxide being released into the atmosphere in the U.S. has fallen dramatically to its lowest level in 20 years, and government officials say the biggest reason is that cheap and plentiful natural gas has led many power plant operators to switch from dirtier-burning coal.”

So if you’ve been championing government action as the last best hope to save humankind from the big broil, you too should find a hobby: “Many of the world’s leading climate scientists didn’t see the drop coming, in large part because it happened as a result of market forces rather than direct government action against carbon dioxide.”

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Anti-CO2 activists may have to find something else to give their lives meaning. The AP reports that “the amount of carbon dioxide being released into the atmosphere in the U.S. has fallen dramatically to its lowest level in 20 years, and government officials say the biggest reason is that cheap and plentiful natural gas has led many power plant operators to switch from dirtier-burning coal.”

So if you’ve been championing government action as the last best hope to save humankind from the big broil, you too should find a hobby: “Many of the world’s leading climate scientists didn’t see the drop coming, in large part because it happened as a result of market forces rather than direct government action against carbon dioxide.”

Finally, if you think the problem has been America’s uncooperative attitude regarding international treaties, you’re wrong: “the shift from coal to gas has helped bring the U.S. closer to meeting some of the greenhouse gas targets in the 1997 Kyoto treaty on global warming, which the United States never ratified.”

It’s an amazing story, really. How did it happen? Shale gas and fracking: “A frenzy of shale gas drilling in the Northeast’s Marcellus Shale and in Texas, Arkansas and Louisiana has caused the wholesale price of natural gas to plummet from $7 or $8 per unit to about $3 over the past four years, making it cheaper to burn than coal for a given amount of energy produced.”

Whether or not you think anthropogenic global warming is a real problem, it’s hard to overstate the significance of this. For years, the Inconvenient Truthers have been telling us the sky will fall unless Big Government comes in to regulate emissions on a global scale. Federally backed “green-energy” companies like Solyndra have gone bust on the taxpayer’s dime trying to combat CO2. The free market is now under perpetual attack, as a human-killing, planet-destroying profit monster that can only be fought back by a new regulatory regime. Hydraulic fracturing (the practice of freeing underground natural gas by using a mix of pressurized fluid containing water, sand, and chemicals) has come under fire from environmentalists as the energy-evil du jour. And, of course, in the supposedly “post-American” world, we are told the United States can no longer afford to look down on international agreements that would hold the behavior of Americans to the standard of some mediating body like the UN. All of it, nonsense.

No government or bureaucracy can centrally plan to accomplish what the self-interested nodes of a free-market system can. The U.S. brought down CO2 emissions without help from Washington or the United Nations. We can always raise them again by killing free-market innovation on the advice of environmentalists.

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