With oil and gas production at an all-time high in the United States, many people are wondering if low oil prices will burst a hole in the bubble. The prolonged decline in oil prices has left many economists in fear as to whether or not the shale revolution can continue to carry the economy.
Temporary or Long Term Growth
Contrary to popular belief, the shale revolution is not a temporary trend. It is a revolution that is still in the beginning stages. When economists projected that the annual GDP would be boosted by $380 billion to $690 billion by 2020, they did not expect for domestic oil and gas production to be so high. Thanks to hydraulic fracturing, the United States is expected to hit the high end of that projection. Although continued low oil prices could to impede growth, many large producers of shale oil and gas will continue to make profits.
According to the United States EIA (Energy Information Administration), shale oil and gas production has grown by 51 percent each year since 2007. The United States has not been capable of producing anywhere near this amount of oil since 1970.
Advancements in technology have made it possible for energy producers to make their operations more efficient, resulting in more output and less waste. For example, the Bakken and Eagle Ford shale plays have increased oil production dramatically. Both shale formations have gone from producing hundreds of thousands of barrels each day to producing millions of barrels each day, in spite of declining rig counts.
Impact on the US Economy
It is hard to ignore the amount of impact that the shale industry has on the economy. Thanks to shale oil and gas alone, hundreds of high paying jobs were created. Outside of the energy sector, a multitude of pipeline, rail projects, drilling and other infrastructure plans are in the works and can lead to the creation of more than a million additional jobs, mainly in the private sector.
The effects on US energy security and trade have been overwhelming. Many people never believed that the United States would become the world’s largest producer of crude oil. As changes continue to be made to US policy, the FERC (Federal Energy Regulatory Commission) is working on improving infrastructure to facilitate the export of domestically produced crude oil. If certain trends continue, the United States could effectively wipe out its dependency on energy imports within the next decade.
The shale industry provides the United States with a unique opportunity to jumpstart its economy and to sustain economic growth. However, environmental concerns could delay or halt its potential. Rising concerns over environmental and safety concerns that are associated with the fracking industry are making it harder for companies to sustain and create new operations. To gain public support, more attention should be given to addressing environmental and safety concerns. Universal regulations and standards need to be implemented to increase safety and efficiency in hydraulic fracturing practices.
The United States now has the global advantage thanks to its shale industry. With the right approach, policy and regulations, the shale industry could improve the resiliency of the economy.