Fracking: Glass Half-Full or Half-Empty?

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Fracking has been hailed as a revolution in the American energy field. But according to a November article in The Economist, not all are optimistic about the benefits fracking will have on the economy. Some big companies have had poor investment results, and a Goldman Sachs report predicted only a “modest [economic] boost” from shale gas. However, The Economist sees a rosy side even to their pessimism.

Fracking has been hailed as a revolution in the American energy field. But according to a November article in The Economist, not all are optimistic about the benefits fracking will have on the economy. Some big companies have had poor investment results, and a Goldman Sachs report predicted only a “modest [economic] boost” from shale gas. However, The Economist sees a rosy side even to their pessimism.

The Economist notes that U.S. gas and oil output is obviously going up, rising by about one third since 2005 and 2008, respectively. America is even set to catch up to Russia and Saudi Arabia’s position as the world’s biggest natural gas and oil producers.

Ever-expanding gas

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While some big fracking investors like Shell and BHP Billiton haven’t fared too well on fracking investments, the poor results are marked down to untimely and pricey investments.

As for those studies that have more positive outlooks for natural gas, they see a potential addition of two to four percentage points to American GDP by 2020 or so, and the creation of 1.7 to 3.9 million jobs as a result of fracking. It is possible that the lower gas prices could encourage growth in energy-intensive industries that will have a cost advantage by being based in the U.S.

In weighing the difference between positive and mediocre reports, The Economist concludes that even the pessimistic view isn’t such a bad outlook:

“The argument over the impact on the job market is essentially over whether the glass is half-full or half-empty. The most that Goldman concedes in its sceptical report is that the long-term decline in jobs in energy-intensive industries has merely bottomed out. But even this would be worth celebrating. IHS is not the only forecaster to be much more cheerful. It predicts that unconventional energy, as well as providing jobs in its own right, will be supporting 400,000 jobs in manufacturing in 2015 and 500,000 jobs, or 4.2% of total manufacturing employment, in 2025.

The spending-power of those new workers, and the cut in businesses’ and households’ energy bills, should provide a broad boost to the economy. Goldman again puts a cautious spin on the numbers: shale energy’s overall effects will add just ‘a few tenths of a percentage point’ to the annual growth rate, says Jan Hatzius, its chief economist. But although this sounds modest, if sustained for a decade or more, it would add up to something big. Not quite a revolution, perhaps, but a significant turnaround in America’s prospects.”

So, half-full or half-empty, The Economist sees shale gas set to put some beneficial fuel in the nation’s economic tank.

That doesn’t sound half-bad.

>>Source: “From sunset to new dawn.” The Economist. 16 Nov. 2013.

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