Carpe Diem

The great US shale-based energy revolution has revitalized the American economy since 2008, and it’s just getting started

IHS just released a new study titled ”America’s New Energy Future: The Unconventional Revolution and the US Economy,” about America’s shale-based energy bonanza and the resulting huge energy-driven stimulus to the US economy, which is a truly transformative revolution that has been covered extensively on CD.  Here are some highlights:

 Overview: A game-changing revival is under way in the US energy industry that will simultaneously strengthen the nation’s energy independence while revitalizing the competitive position of our manufacturing sector on the world stage. Myriad new technologies, including seismic imaging, horizontal drilling and hydraulic fracturing are unlocking vast domestic reserves of oil and natural gas once trapped in shale and tight sands.

1. In just five years, unconventional activity from tight oil plays has added nearly 1.8 million barrels per day of new domestic crude oil production, helping to reverse a nearly three-decade decline in US oil production (see top chart above).

2. Higher domestic production, coupled with declining domestic demand, has pushed down oil imports – from 60% of 2005 energy consumption to below 42% today (a 20-year low).

3. Over the same period, total US natural gas production has increased 25%, from 52 billion cubic feet (Bcf) per day to 65 Bcf per day, driven largely by unconventional gas activity (see bottom chart above).

4. The energy revolution has driven $87 billion in capital investment in unconventional oil and gas production in 2012 alone. Annual investment will almost double to $173 billion in 2020. Capital investment over the next two decades will average $200 billion annually, with the industry’s cumulative investment by 2035 surpassing $5.1 trillion.

5. In 2012, unconventional oil and natural gas activity supported more than 1.7 million jobs, comprised of 360,000 direct oil and gas jobs, 537,000 indirect supplier-industry jobs, and 850,000 induced jobs. By 2020, a total of 3 million new jobs will be created by the combined direct, indirect and induced effects attributable to unconventional oil and gas activity. By 2035, that will increase to 3.5 million jobs.

Related: See Daniel Yergin’s editorial in today’s Wall Street Journal (“The Real Stimulus: Low Cost Natural Gas“), who concludes that “The rapid growth of oil and natural gas production represents a major opportunity for the U.S. Without these energy resources, the disappointing economic picture would look worse, and so would the jobs numbers. Instead, the energy revolution is helping revitalize the economy and make the U.S. more competitive in the global marketplace.”

See also Jimmy P’s comments, and my CD post yesterday on fossil fuel production reaching an all-time high this year. 

Bottom Line: As I commented yesterday, it’s really hard to overestimate the significant importance of the shale revolution on the U.S. economy over the last five years and it’s sobering to think about where the US economy and job market would be today without that well-timed energy-based stimulus to the economy that started in 2008 just as the Great Recession and financial crisis crippled the economy.   

This week’s IHS report provides further evidence of the transformative effect of the shale revolution on the US economy over the last five years, and it’s clear that America’s energy bonanza will continue to provide significant economic benefits for decades to come.  The shale boom is creating millions of shovel-ready jobs throughout the economy, stimulating the economy with trillions of dollars of new investment, lowering energy costs for residential and industrial customers and generating billions of dollars of savings, making U.S. natural gas prices more affordable than anywhere else in the world and sparking a manufacturing renaissance, adding billions of dollars of revenues for federal and state governments, and creating thousands of new millionaires from the oil and gas royalties being paid out to farmers and landowners around the country. 

And the impact of the energy revolution is only beginning, according to Daniel Yergin, and that provides one of the best reasons to be optimistic and bullish about the future of the US economy.

9 thoughts on “The great US shale-based energy revolution has revitalized the American economy since 2008, and it’s just getting started

  1. Shale Gas according to Rex:

    Rex W. Tillerson, the chief executive of Exxon Mobil, which spent $41 billion to buy XTO Energy, a giant natural gas company, in 2010, when gas prices were almost double what they are today, minced no words about the industry’s plight during an appearance in New York this summer.

    “We are all losing our shirts today,” Mr. Tillerson said. “We’re making no money. It’s all in the red.”

    Source: WSJ, posted on yesterday’s shale post.

  2. There is not any National Hockey League action right now but there is a very powerful hockey stick in play.

    See the U.S. Natural Gas Production Chart graph above. :-)

  3. 3. Over the same period, total US natural gas production has increased 25%, from 52 billion cubic feet (Bcf) per day to 65 Bcf per day, driven largely by unconventional gas activity (see bottom chart above).

    Great. Pipeline imports from Canada have declined, probably to minimum operating levels (MOLs), and LNG imports were never a factor in U.S. consumption. Now what. Oh, I know, U.S. natural gas production has flatlined in 2012. Now what. Let’s wait for LNG exports to start in 2015 and that elusive chemical sector to ramp tomorrow.

  4. American entrepreneurship, capitalism and free-markets launched the current boom in mid-2006; years before Obama took office.

    WE DID THAT…Obama didn’t do that–he had nothing to do with that.

  5. Right on Mark. And don’t forget the geopolitical realignment our energy independence is generating. Also, we are entering an era of abundance produced by computing and robotic power in manufacturing, water purification, agriculture, etc. etc. Mark, please take a look at a book entiled Abundance that covers this side of the equation and inform your readers about it.

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