At the Cornell Debate on November 15th I was asked, "What does fracking mean for the economy?" I was given 4 minutes to answer the question. I post what I said here because I think it is the core argument of why the United States needs to develop shale, and do it now.
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Energy
independence has been in the nation’s psyche ever since it was first proposed
in November 1973. An aspiration akin to
landing the first man on the moon, or defeating the Soviet Union, energy
independence has proven far more elusive. So to put the economic effect of
fracking in context, when the IEA [International Energy Agency] issued its forecast this past Monday -- that
the United States will be the world’s largest oil producer by 2020 and
energy-self-sufficient by 2035 -- it
predicted that something that has been impossible for two generations could be
achieved largely because of fracking.
Energy markets are global, meaning
energy independence does not insulate the United States from global affairs or
global prices. However, as the
persistent $10-20 spread between Brent and WTI oil price shows, it is possible
to have differential prices in global markets for an extended period of time.
When price differences are large and
stable, investment follows. For
example, the price of natural gas in the United States has fallen from $9 to
$3/MCF because of fracking. Natural gas
is priced at an oil equivalent of $20/BBL, a 4X advantage over world prices. As a result, fuel, electricity,
transportation and raw materials are priced lower here than anywhere else. Investment follows like the multi-billion
dollar one Shell has announced in Western Pennsylvania for a world-class ethane
cracker creating thousands of jobs and a hub for the resurgent petrochemical
industry.
When lower prices from the US
transmit around the world, it opens a door for everyone including individuals living
in "grinding energy poverty" [phrase used by Secretary of State Hillary Clinton in a speech given October 19, 2012 at Georgetown University] on the lowest rungs of the economic ladder. 1.2 billion people do not have access to
electricity. 3 billion people cook over fires fueled by dung, wood, charcoal
and coal. When cooking fuel becomes
cheaper and cleaner, their lives will improve, and so will ours. This problem
will not wait for the next generation.
People want better lives now.
Another possibility brought forward
by fracking is the potential for China and India to bypass coal and move directly
to natural gas. Both countries have large
resources of shale.
American jobs
are another obvious benefit. The most
recent estimate is 1.7 million direct, indirect and induced jobs have been
created because of fracking. That number
could double in the next 10 years.
Industry jobs are criticized
for being boom and bust. I have personal
experience with that joining the industry during a boom and leaving to go back
to school during a bust. I don’t think it’s
ever realistic to think that a job is guaranteed for life no matter what
industry you join.
Industry jobs require
skills and expertise in engineering and science, management, accounting and
law. Skills are transportable. Industry also provides high paying jobs for
blue collar workers, who have an unemployment rate 3% higher than the national
average.
It’s instructive to
look at what has already happened in Pennsylvania. Before the Marcellus, the state imported 75%
of its natural gas from the Gulf Coast States and Canada. Now the state exports gas. Money that used to flow out of the state is
collected within the state and contributes severance, ad valorem and income taxes
to state and local budgets. During the
first year of implementation in 2011 the impact fee on unconventional natural
gas wells raised $205 million.
You don’t have
to take my word for it. Go see for
yourself. It’s easy to drive to Tioga,
Bradford or Susquehanna counties. Go to
the diner. Talk to people. Of
course there are some nay sayers, change is never easy, but by and large people
are enthusiastic about what’s happening. All
eight elected state representatives from these counties, Republicans and
Democrats, are in favor of natural gas.
As State
Senator, Lisa Baker, from Susquehanna County said in a speech she gave on June 29, 2012 to the Pennsylvania Senate supporting Shell’s ethane cracker, “Over the years we’ve seen multiple economic
strategies launched and countless incentives and assistance programs offered to
jump start job creation. Few have had any
hope of yielding the economic payoff anticipated from this project. “
Till Next Time,
Energy Mom
New York City
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