I write often about America’s energy boom – the explosion in oil and gas development made possible by innovations like fracking – but I’m not sure how many people realize the profound impact it’s having on our economy. It’s not just states like North Dakota that are benefiting. As a case in point, consider that the explosion in development in the Bakken is stimulating economic activity in places as far away as Washington:
When recent headlines proclaimed that the United States was poised to become the world’s largest oil producer by 2017, the import of that news may have seemed distant and abstract. Yes, the oil fields of North Dakota, Montana and Texas are alive with new activity, but for Northwest residents, the effects are not something they see every day.
That fact is quickly changing in businesses from Olympia to the Canadian border. The arrival in Tacoma last week of a 103-car train from North Dakota was a sign of just how swiftly the sudden abundance of oil in this country is shifting business even 1,200 miles away from the booming oil fields.
That BNSF Railway train was the first of what will ultimately become weekly trains bringing oil to Tacoma from the new oil fields opened up by hydraulic-fracturing technology in the country’s northern Great Plains.
The train’s arrival and the construction of a new $8 million rail yard at the Tacoma Tideflats refinery of U.S. Oil and Refining is indicative of a shift in the source of crude shipments to Puget Sound refineries.
More oil and gas production here in America is going to mean more jobs available for people to produce that oil and gas. Move that oil and gas. Refine that oil and gas. Distribute that oil and gas.
But that’s just the direct impact. More energy production means cheaper energy prices. That not only means lower prices (or, at least, prices that rise less quickly) for consumers, but it’s also a tremendous boon for manufacturing which consumes enormous amounts of energy. By-products from oil and gas production are also useful for other industries. I’m told that much of the natural gas produced in the Bakken is less useful for energy or heating than it is for the production of things like plastics.
I’m not smart enough to know why, but the idea that America’s dramatic increase in oil and gas production has a lot of ancillary benefits.
What all this adds up to is moderate improvement in our national economy. Modern economies run on energy. There is nothing as sure in economic world as the fact that there will be increasing demand for energy, and that most of that energy will be provided by fossil fuels like oil and coal (as opposed to expensive and unreliable alternatives like solar, wind and biofuels which exist because of politics rather than market demand).
So, ironically, America is going to see some economic improvement even despite what happens with the “fiscal cliff.” I write “ironically” because neither President Obama, nor his party which has largely controlled the agenda in Congress since 2007, are friendly to oil and gas development. Their policy agenda is aimed specifically at forcing America away from those energy sources and toward the aforementioned expensive, unreliable alternatives.
It is ironic, then, that President Obama and Democrats will no doubt benefit politically from economic recovery driven by a boom in the very sort of hydrocarbon energy development most of them have spent big chunks of their careers opposing.