Dismal jobs reports and high unemployment continue to weigh down the U.S. economy, but there are a few bright spots. Most notable among them: energy production, particularly the shale oil and shale gas revolution.
The technological one-two punch of horizontal drilling and hydraulic fracturing has created a remarkable energy boom and created hundreds of thousands of jobs. Ohio is no stranger to energy production. Thanks to these technological developments, the state’s economic outlook is much brighter — so long as the federal government stays out of the way.
The economic benefits associated with shale oil and shale gas production are undeniable. The oil and gas boom has created work for geologists, engineers, rig workers, truck drivers and pipe welders.
Manufacturers in places such as Youngstown are expanding operations to meet the need for the steel piping necessary for oil and gas extraction. The energy boom also spells higher demand for restaurants, repair shops, hardware stores, hotels, and laundry mats in those areas.
America’s abundance of natural gas makes the U.S. an attractive place to do business, especially for energy-intensive industries. The chemical industry, which already employs 40,000 people in Ohio, is expanding and citing proximity to natural gas production as the chief reason for their location.
But the economic benefits from shale gas production extend well beyond jobs. Think about the money shale gas production is keeping in your wallet. Just as high energy prices drain your wallet of disposal income, meaning fewer trips to restaurants and movie theaters, cheaper energy prices pad your wallet.
Economists measure this by estimating consumer surplus, or the gains from savings from reduction in price. For instance, if you were willing to bid $80 for an item on eBay, but won the item for $50, your consumer surplus would be the $30 remaining in your bank account.
Because the shale gas revolution dramatically lowered natural gas prices, a group of Yale researchers calculated that in 2010 alone, the consumer surplus from shale gas production was worth more than $100 billion. At a time when Americans are trying to cut costs, saving money through lower energy bills is critically important.
(Nicolas Loris is a Policy Analyst at The Heritage Foundation’s Roe Institute for Economic Policy Studies. Loris studies energy, environment and regulation issues such as the economic impacts of climate change legislation, a free market approach to nuclear energy and the effects of environmental policy on energy prices and the economy. Originally posted on The Foundry, a Conservative Policy News Blog from The Heritage Foundation.)