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The Far-Reaching Benefits of America’s Energy Boom

“Amid the gloom there are unexpected signs of boom, especially in energy,” begins a tentatively hopeful report in the Economist on America’s economy. Those signs of boom begin with all that newly available oil and gas being pumped out of shale formations across the country, but they extend widely into other sectors that work with such resources, like chemicals and steel.

[T]he biggest impact of the shale-gas boom will be felt downstream. It is a primary feedstock for ethylene, the building block of countless other products, such as plastics and tyres. . . .

The American Chemistry Council has counted $30 billion-worth of new investments that will boost ethylene capacity by a third. It reckons this could generate, at a conservative estimate, 17,000 permanent jobs directly and many more indirectly. Such jobs pay well: Ms [Laura] Ambrose [of Dow Chemical] reckons her new hires will start at around $50,000 and, with overtime, could earn up to $100,000.

Petrochemicals are only the start. Industries as diverse as glass, fertiliser and plastic bags could all benefit from cheap, plentiful natural gas. Nucor, a steelmaker, is building a plant to make iron from natural gas and iron-ore pellets in Louisiana. . . .

Assuming, however, that oil prices do not continue to rise so rapidly, energy is likely to exercise less and less drag on America. Last year, for the first time in decades, America became a net exporter of refined products such as petrol. By early next decade, according to projections by the Energy Information Administration, it will be a net exporter of natural gas. BCA Research, a financial-analysis firm, reckons these factors could slash America’s trade deficit by $100 billion by 2020, and boost total economic output by 0.2%-0.3%.

These are promising forecasts, but the predicted benefits lie years down the road. The U.S. economy is still struggling, but at least the horizon is brightening.

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  • thibaud

    The benefits to specialty chemicals companies that use natural gas as a feedstock are occurring now and already showing up in their earnings from their US operations.

    But it needs to be remembered that the payoff was DECADES in the making, and similar payoffs from other unconventional fuels investments will likewise take decades to materialize.

    Here’s another link, to a Nordhaus-Shellenberger interview with Penn State gas expert Terry Engelder, on the federal government’s crucial role in the shale gas revolution.

    “Engelder’s testimony relates the long and productive partnership between the gas industry and the federal government that led to today’s ongoing shale gas revolution. ‘The government got it really right,’ says Engelder. ‘In terms of a symbol of effective public-private venture, it’s shale gas.’ ”

    And finally, an interview with right-wing gas exec Dan Steward of Mitchell Energy wherein he agrees wholeheartedly that federal funding and support was critical – not least the brilliant seismic mapping work done by Dept of Energy engineers at Sandia Labs in New Mexico:

  • Kris

    “The U.S. economy is still struggling, but at least the horizon is brightening.”

    As if a massive conflagration were approaching…

  • Mrs. Davis

    Once again, Thibaud proves nothing. Because government spreads dollars liberally over research does not mean the research would not have occurred without government money. Too much of the money government spends in research is wasted or goes to support politically favored companies, as Solyndra demonstrates. If we got the government out of business, maybe business would get out of government.

  • Nathan

    @ Mrs. Davis: I wouldn’t normally side with Thibaud, but I think you are being unfair to him here. It is certainly possible that the research and surveying needed to open up the shale and fracking booms would have occurred without government investment, but we don’t know that it would have either. It’s fair to point out a positive role government has played when such examples can be found.

    I think it’s also unfair to compare this sort of government involvement (surveys and basic research it sounds like) to Solyndra, the subsidization of *production*, which is frankly ridiculous even if it works.

    Honestly, the government would have been irresponsible if it didn’t at least get involved with the survey part of this. The US government should be aware of its available resources on federal land.

    Government investment in basic research for future energy sources is similarly well-advised. In these times of tight budgets, that money will have to be mothered however: we can’t afford to finance research in every rainbow in the sky. Sadly, yes, we must assume that this expenditure will come along with some amount of favorite-picking and general corruption.

  • thibaud

    Read the links, Mrs D.

    Listen to oil exec and self-described Reagan conservative Dan Steward.

    This one’s open-and-shut. If no DoE programs over the last quarter of the 20c, no shale gas revolution in the 21c.

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