Can major new investments in American oil, gas and coal production send our economy soaring?
President Barack Obama seems to think so. He forecasts sunny job growth in the natural gas sector, in particular. Natural gas jobs could number as many as 600,000 by decade’s end, the president proclaimed in his 2012 State of the Union.
That news may come as a surprise to shale drillers in parts of Pennsylvania and West Virginia. Several companies plan to extract less gas in 2012 than in 2011.
Why? Natural gas prices are near 10-year lows and some wells are losing money. Breakthroughs in gas extraction — in particular, hydraulic fracturing or “fracking” — have made gas cheap and abundant. Gas inventories are piling up, and if reserves go unsold, expect prices to fall further.
The natural gas glut has repercussions in other parts of the energy sector. Comparatively expensive solar has lost its luster and cheap gas could knock the wind out of wind — especially if Congress allows tax credits for wind energy to expire. Dirtier parts of the national energy portfolio are suffering, too. Cheap gas is partly to blame for recent layoffs in Appalachian coal mines.
Fat inventories of natural gas and plunging prices hurt energy jobs, but shouldn’t any industry that depends on fossil fuels feel blessed? And what about manufacturers of products made directly from cheap fossil fuels?
Consider, for example, that natural gas contains ethane which can be converted into ethylene — a compound used in thousands of products.
In the natural gas-rich Marcellus Shale Formation — concentrated largely in New York, Pennsylvania, Ohio and West Virginia — big plans are underway to crack ethane into ethylene, promising thousands of temporary construction jobs and hundreds of hires in chemical production. All of this sounds good for the economy, but there are some important caveats.
Cheap energy for the ethylene industry — or any industry — is wonderful, so long as there is sustained consumer demand.
If the chemical industry produces too much ethylene, it risks the same predicament that natural gas drillers have today: prices drop, producers go into a funk, and line workers see pink slips.
What ails the economy isn’t solved by new investments in coal mines, oil fields, and gas wells unless people are consuming.
Post-recession personal consumption has badly lagged the previous two economic recoveries. Stubbornly high unemployment rates are a big part of the problem. So is a deflated housing market and feeble levels of residential investment.
Past economic recoveries were led in large part by housing construction. Not this time. Current stocks and flows of energy are adequate to meet the needs of a slowly awakening housing sector.
Meanwhile, prospective full-bore development of American offshore oil won’t have a major dampening effect on gas prices nor will the modest additions to our crude oil supply from TransCanada’s currently-stalled Keystone XL pipeline project.
Drill all you want, baby. But don’t be a cry baby when gas prices stay high. What works to make natural gas affordable currently doesn’t work the same way for oil. Gas injection and other enhanced oil recovery methods are more complicated and costly to deploy than fracking.
Let’s assume for the sake of argument that a big burst of investment — public, private or both — in fossil fuel production really shifts our economy into high gear in 2012.
Can’t complain, right? Wrong, once the long-term costs are accounted for. A fossil-fuel intensive economic recovery may generate jobs in areas we never really intended: experts at repairing groundwater fouled by fracking, doctors skilled at treating asthmatics, idled fishermen donning hazmat suits, scrubbing oil off the beaches, and so on.
Fossil fuels are the engines of our economy. We are dumb to develop and bring these fuels to market in the absence of robust demand. We are dirty and dumb if we extract and burn these fuels without anticipating the public health and environmental consequences.
• Auer is dean of the Hutton Honors College and professor at the School of Public and Environmental Affairs at Indiana University.
Comments (11)
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Being Obama's green energy and jobs have failed so miserably (and that's putting it politely), what alternatives did the big O have? Natural gas is under utilized, that's the problem. The author fabricates all this doom and gloom of gas extraction when none of this has happened. He has it taking the blame for green energy failure, what a crock. Natural gas may not be a long term solution but its right for today. Extraction technology is here, its safe, and we don't have to deal with the Middle East. This guy needs to wise up.
Manufacturing
Cheap natural gas has some companies looking to move their manufacturing operations back to the U.S. Asia does not have such cheap energy, and with their labor and real estate costs rising, the U.S. is starting to look a lot more attractive.
Love or hate shale gas, it could reshuffle the deck on the world's economic alignment. It gives us a huge advantage.
I heard a guy say that China
I heard a guy say that China offered to build a pipeline to tidewater at no cost to the US as long as we only charged them market price for the gas. GW nixed it as there is a written or unwritten rule that we don't sell gas or oil to the Chinese.....
Bandit, how can you say the green energy scams were a failure? I heard a couple CEO's from those companies got big bonuses. That's got to be stimulative to the economy.
Burn 'em if you got 'em!
Natural gas may not be as clean as sun and wind, but, it is available in abundance and relatively affordable. The economy cannot climb if it's held down by high energy costs. Natural gas burns cleaner than petroleum and coal. It can replace most any form of fossil fuel consumption. Let's get it. Pipe it to every home and business and replace carburetors on every vehicle. Generate electricity with it. Then watch the gas "glut" decline. Watch the price of gasoline and diesel go down. Watch domestic manufacturing go up. Might even make the cleaner renewable energies more affordable to develope. Could be the key to the next boom.
Oh boy, another haughty
Oh boy, another haughty college professor furthering the agenda of the progressives. Nothing but blather and lies.
I'm waiting for the college bubble to burst and then we can have a giant house cleaning in our state owned universities.
It'll be ugly but it's long overdue. Maybe the private universities can step up and fill the stinky void that's left.
remember the 70's
During the 70 propane was going to be the future fuel for vehicles. Thousands of vehicles were converted from gasoline to propane with a fairly easy to install kit. However other than a lot of farm equipment propane never caught on as a fuel for you car or pick-up truck. Although lots of forklifs run propane even today. Cars and light trucks just had such bad performance people removed the conversions after a short ownership period. I wonder if this surge to natural gas will find the same fate.
As to the ongoing foolishness about how nothing has worked with green energy I suggest a quick internet search to find the tens of thousands of wind turbines being us around the world. OH Ya they don't work that's why in Southern Texas refineries have build wind farms to generate power to operate plants that produce gasoline and diesel fuel. And those solar panels are another fad that only the dumbest of corporations use to generate power. But hey we all know corporations always chose to use technology that does not work.
@islander - with enough
@islander - with enough government mandates and subsidies anything is possible - atleast for awhile.
Your homework for this weekend is to research Spain and alternative energy. A full report is due Monday.
Here's an interesting fact to include - unemployment rate in Spain is 24%.
Build the road
The road is also a corridor for the natural gas pipeline into Juneau. The pipe fitters from Local 262 should be able to get us hooked up.
Will need a liquification facility for efficient use in vehicles. In state would be a plus; uphill of the pipe corridors. Tok maybe?
Is your comment a reaction to something else, ~Banditrider~?
Why get into the President's face when he very little to do with it? He is simply between a rock and a hard spot on this issue.
There is no cheap energy at this point, but all the different grades of energy all need to be used, especially if they are clean.
Juneau running on a combo of Hydro and Natural Gas would make us one of if not the cleanest communities in the world. By the looks of it, it should be easily possible. The 'green' energy is good but expensive; the shale oil and coal and fracking is environmentally dirty, they should be the least preferred types of fuels to support and invest in. Natural Gas does make carbon dioxide but it is very clean.
Propane/Natural Gas use in auto's and trucks works really good, it is just the fuel and technical support stuff is not in place to convert everything to gas and keep them tuned. They do need to be well maintained and in perfect tune to operate well, when the timing gets a little off they loose power quickly.
unintentional highlight?
This piece says a lot about the structure of our economy, whether Auer intended to or not. Auer argued there is, and will likely continue to be a surplus of natural gas in America, leading to lower energy prices. LNG producers will suffer, as the monetary value of their product will decrease. This will ultimately lead to a reduced workforce due to decreased personnel funding. In other words, according to Auer, cheap natural gas = reduced jobs and a declining economy.
He then goes on to imply that if only Americans were consuming more, the situation would resolve itself. Gas producers could sell their product to manufacturers, who would convert ethane found in natural gas into ethylene to create consumer goods. The purpose? To manufacture a bunch of crap that nobody really needs. Marketing for these manufactured goods will convince us that we need them, and we'll all go out and spend our way out of the recession. We'll demand more, which will lead to more resource exploitation, all for the sake of stimulating the economy. This makes no sense. We shouldn't need to buy crap we don't need in order to keep our economy afloat.
To me, this illuminates the faults inherent in the 20th and 21st century American economy. What are the essentials for a healthy life? Food security, water security, energy security, love, and a sense of purpose. Here we have a surplus of cheap energy (at least down south, according to Auer). Yet somehow this can hurt the economy. If the share value in a natural gas company is not rising at a high enough rate, the company suffers, the employees suffer, and ultimately the economy suffers. If the share value in a natural gas company is soaring, the company booms, employees are compensated and ultimately consume more. The economy grows.
We've gotten off track somewhere here. Our economy doesn't fit the scale and the needs of people. It fits the structure and needs of the Dow Jones and the NYSE. According to this article anyway, this structure has created for us a conundrum in which Americans cannot capitalize on cheap natural gas if it's available in surplus. Americans are effectively being handcuffed by this situation. The purpose of an economy is to produce, trade, and distribute goods and services for the benefit of a community. The purpose of an economy is not to grow unsustainably and exponentially as many of us think. It's important to note that the way our economy is structured is not working for the people.
"Your homework"??
I think you just abrogated any right you have to call me snide or arrogant.
Your homework is to learn some science. A full report is due when you're honest enough to do so.