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Mitchell Schnurman’s recent column in the Dallas Morning News drives home the importance of the “shale revolution” to the nation’s economic health and global competitive position. Thanks to this revolution, America today is the world’s number one producer of natural gas, and we’re projected to surpass both Russia and Saudi Arabia to regain the crown as the world’s number one oil producer by 2016.
Six years after the beginning of the “Great Recession,” the country still hasn’t recovered all of the jobs that were lost between 2008 and 2010. But the oil and gas industry has prospered, adding tens of thousands of high-wage jobs in energy producing states like Texas, North Dakota and Pennsylvania. Indeed, oil and gas employment today is more than 25 percent greater than it was in 2008.
What’s more, our newfound oil and gas abundance has generated economic gains that are benefiting all regions of the U.S. Last year, American exports reached an all-time high, cutting the trade deficit to a five-year low. This has occurred for two basic reasons. Because our energy costs are so much lower than those in Asia and Europe, America is undergoing a revival in its manufacturing sector. For example, as recently as 2005, the U.S. was a net importer of petrochemicals. But today, because of lower fuel and feedstock costs, America’s petrochemical sector is a net exporter and is attracting sizeable foreign investment. For example, BASF—the huge German chemical company—recently announced it would build a new plant in Freeport, Texas to manufacture emulsion polymers. The company specifically referenced lower energy costs as a major factor in its investment decision.
The trade gap has also narrowed because of a big jump in exports of gasoline, diesel, jet fuel and other refined products. Refineries along the Texas/Louisiana Gulf Coast now have excess capacity because of declining domestic demand for gasoline and diesel as America’s cars and trucks become more fuel efficient, a trend that is likely to continue for the foreseeable future. This capacity is being used to sell refined products around the world.
Because of America’s new energy equation, with production of oil and gas growing rapidly while domestic demand for liquid fuels is declining, it’s time to get serious about exports. The good news is that four terminals for the export of liquefied natural gas (LNG) have been approved by federal regulatory agencies, and two are actually under construction. More than a dozen additional applications are pending. With more support from Washington, America could become a major LNG exporter within a decade, which would create hundreds of thousands of new jobs across the economy.
It’s also time for the U.S. to start exporting oil. Exports have been essentially banned since the OPEC embargo forty years ago; but today, because of America’s surge in oil production, OPEC no longer calls the tune and oil has become just another commodity. True, we will remain a net oil importer for the foreseeable future, but most of our imports come from our friends in Canada and Mexico. If it makes economic and logistical sense to export some grades of oil, such as light sweet crude from the Eagle Ford shale in Texas, we should do so. And where it makes economic and logistical sense to import oil, such as diluted bitumen from the Albert Oil Sands, we should do so as well.
The bottom line is that America’s shale revolution, manufacturing revival, and export surge are all helping to grow the economy. That’s why we need public policies that encourage, rather than retard, energy development and trade.
Bernard L. Weinstein is Associate Director of the Maguire Energy Institute and an Adjunct Professor of Business Economics in the Cox School of Business at Southern Methodist University. He has taught at Rensselaer Polytechnic Institute, the State University of New York, the University of Texas at Dallas, and the University of North Texas. He has authored or co-authored numerous books, monographs, and articles on the subjects of economic development, energy security, public policy, and taxation. His work has appeared in professional journals as well as the popular press. He earned an A.B. degree from Dartmouth College and an M.A. and a Ph.D. in economics from Columbia University.Full Bio
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