A huge plume of gas burns while work progresses at a fracking site run by Encana Corp. in a heavily wooded area between Kalkaska and Grayling, Mich.DALE G. YOUNG/The Associated Press
The shale oil and gas boom in the United States has done more than rewrite the energy supply picture south of the border. It may also have put an extra $1,200 (U.S.) a year into the average American's pocket.
According to a study by energy industry consulting firm IHS CERA, in 2012 the hydraulic fracturing boom supported 2.1 million jobs, added $283-billion to U.S. gross domestic product, put $75-billion into state and government coffers, and increased the income of the average U.S. household by $1,200.
It is an industry-supported study, so we'll all make sure we view its results through somewhat-jaded eyes. Even so, they are impressive results. The findings indicate that the fracking boom is lifting the U.S. economy in concrete ways, which is no small claim at a time when output is sluggish and the price of energy is uncomfortably high.
In case you managed to miss it, fracking is a method of resource extraction done by drilling into the ground and injecting water, sand and chemicals into shale rock, which in turn frees trapped hydrocarbons. Depending on your point of view, it is either the greatest thing since sliced bread, or it is the work of the devil and destroying the environment in the name of saving a few pennies. These days, there seems to be very little neutral ground between the two views.
What we mostly hear are the negatives that go along with fracking, and to be fair it is a sizable list. From groundwater contamination through to leaking greenhouse gases to possibly causing small earthquakes, the process does have potential hazards that need to be monitored and controlled. But that is true of other methods of resource extraction as well.
So what are the positives? You can quibble with the exact figures in the IHS CERA study, but the fact is that fracking is part of a large and growing industry and is also a cost-effective way to get energy out of the ground. That "cost-effective" thing may not seem important at the moment, but is going to get a lot more important.
The world's population is expanding at a massive clip: From about 7.2 billion in the world right now, the United Nations figures we are headed to 8.1 billion by 2025, and to maybe 9.6 billion by 2050 (if you care to look out that far). That in itself will mean an expanded need for energy. In addition to the increase in population, the world is also seeing an increase in its middle class, as populous countries such as China, India and Brazil industrialize. As people move out of poverty, they have the money to pay for things that North Americans take for granted – things like heat in the winter and air conditioning in the summer. That is going to put even more pressure on energy prices, and it is going to do so sooner rather than later.
If a larger, richer world asks for more energy and is not met with a larger supply of it, North American consumers are going to feel the pinch in a big way. It will be more expensive to drive, more expensive to fly, and more expensive to buy anything, given that oil is an input for pretty much every business cost. Oh, and squeezed companies may not feel too generous about handing out higher wages, either.
The debates over fracking are going to go on a long time, and they should. The industry is still relatively early in its development, and plenty of things can probably be improved environment-wise. Still, in the absence of alternatives, an industry that meets a need and does so in economically positive way should not be dismissed without a lot of thought into what that might entail.
Linda Nazareth is the principal of Relentless Economics Inc. and a senior fellow at the Macdonald Laurier Institute.