Alejandro Rojas, Columnist
The United States has historically been a major oil producer, but over the past couple of decades, output has steadily declined. Production peaked in the 1970s and fell to an all-time low of five million barrels a day in 2008, while natural gas production was at 48 billion cubic feet per day in 2006. New technology and a growing demand have facilitated the oil boom here in the U.S., reducing our dependence on foreign oil imports. With the oil industry on the rise again, it has attracted attention, gaining public awareness and sparking debates over environmental and social issues. With much of the discussion on the narrative of ethical principles, we have had little conversation on the economic implications of efficiently producing gas and oil. The rise in oil production carries uniformly positive possibilities for growth, jobs, trade and capital flow.
Newly advanced forms of hydraulic fracturing and seismic exploration, a process that was not economically feasible in the past, have largely enabled increased production of domestic oil and natural gas. The ability to drill horizontally means that one traditional vertical drilling site can access additional wells drilled horizontally and at greater depth. Combined with modern fracturing, this has allowed oil and gas trapped in tight rock formations to be extracted cheaply and at huge volumes. U.S. oil production is now up to 7.5 million barrels a day and expected to reach nine million by 2020, while natural gas production has soared to 67 billion cubic feet a day, according to the American Petroleum Institute. To date, the U.S. is the only nation taking full advantage of this technology.
According to the consulting firm IHS, unconventional oil and gas production supports more than 1.7 million jobs in the U.S., while these new gas reserves are pushing down the price Americans pay for energy. Disposable income has increased by an average of $1,200 per U.S. household due to savings from lower energy costs, as well as lower costs for all other goods and services. In addition to American households, cheap natural gas is a big stimulus for all of U.S. manufacturing. Companies benefit from cheap energy that carries throughout the daily conduct of their business. As a result, goods and services become cheaper for consumers, fueling the cycle of production and consumption synergistically. This is a strong implication in the rise of consumer spending and the strengthening of the consumer price index over the past year.
In addition to significant job and economic impacts from energy production and its extensive supply chains, the growth of long-term, low-cost energy supplies is benefiting households and helping to revitalize U.S. manufacturing, creating a competitive advantage for U.S. industry. Oil and gas production won’t necessarily mean significantly lower gasoline prices, which will still be influenced by global markets, but the production has profound, beneficial effects on the economy. Using advanced technology, we can find ways to control the spread of pollution so the benefits outweigh the environmental and social risks. The expansion of oil and gas production creates and sustains jobs while providing cheap energy to the rest of the country that ripples through manufacturing, trade and consumption.