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The 'Shale Boom' Drives U.S. Growth
The 4% Growth Project is searching for ways to accelerate economic growth. Long term, one of the key ways an economy can achieve growth is through innovation and productivity enhancements. The energy industry is a shining example of how technological advancement is paving the way to stronger economic growth in the United States. New projections indicate that the U.S. is poised to become a major player in the global energy market. Last month the International Energy Agency (IEA) announced that U.S. oil output is poised to overtake Saudi Arabia’s output by 2020. Forecasts predict that the U.S. will pump 11.1 million barrels of oil per day in 2020, up from 6.7 million barrels per day in 2012. So far this year, crude imports have fallen 11%, and the U.S. is on track to produce its most oil since 1991. The Energy Information Administration projects that oil imports will account for 42% of all U.S. oil consumption in 2012, down from 60.3% in 2005. Furthermore, the U.S. Energy Department reports that increased production of oil and natural gas has allowed the U.S. to meet 83% of its energy needs during the first six months of 2012, the highest proportion since 1991. The increase in domestic production of oil and gas can be attributed to the advancement of technology. Horizontal drilling, accompanied by the use of hydraulic fracturing, has allowed for the extraction of hydrocarbons from previously untouched shale rock formations. The shale revolution began with natural gas, and it has allowed the U.S. to unlock a supply of natural gas that, by geologists’ estimates, could power the nation for 100 years. Similar technology is now being used to extract oil from shale, leading to a surge in domestic crude production. This technology revolution has sparked a “shale boom” across the U.S., spurring economic development in regions such as Texas (home to the Barnett and Eagle Ford Shale), North Dakota (home to the Bakken Shale), and Pennsylvania and Ohio (home to the Marcellus Shale). The shale boom has been, and will continue to be, an engine for job growth. Economists at Citigroup Inc. estimate that increased domestic oil and gas production, and the economic activity that flows from it, will create up to 3.6 million new jobs by 2020 and increase real U.S. gross domestic product by between 2% and 3.3%. Clearly, the oil and gas industry is going to play a crucial role if the U.S. economy is to achieve our goal of 4% growth. Another study, by IHS Global Insight, reports specifically on the economic benefits of shale gas production. The shale gas industry supported more than 600,000 jobs in 2010, and is expected to support nearly 870,000 jobs by 2015 and more than 1.66 million jobs by 2035. The production of shale gas contributed more than $76.9 billion to U.S. GDP in 2010, and it is estimated to contribute $118.2 billion in 2015 and $231.1 billion in 2035. The shale gas industry is also expected to generate more than $933 billion in tax revenues for local, state, and federal governments over the next 25 years. Even better, the U.S. is projected to become a net crude exporter by 2030, and has already begun to export some of its vast supplies of natural gas in liquefied form (LNG). These opportunities will decrease the U.S. trade deficit, and foster economic growth through international trade.