A study just released by global information company IHS says that the unconventional oil and gas revolution will increase disposable household income in the U.S. by more than $2,700 and improve the country’s trade position by more than $164 billion in 2020. The report also predicts that more than 3.3 million jobs will be supported in 2020 as the unconventional oil and gas revolution boosts industry competitiveness and manufacturing growth.
According to HIS vice chairman Daniel Yergin, the unconventional oil and gas revolution is much more than an energy story; it reverberates throughout the U.S. economy not just for upstream and processing jobs and lower energy prices. It will also help revitalize the U.S. manufacturing, refining and petrochemical processing sectors.
For an economy still struggling to overcome the recession of 2008, this is excellent news and was confirmed by several speakers at VMA’s recent 2014 Market Outlook. But also at the Market Outlook were a couple of concerns connected to this growth in the unconventional oil and gas sector.
One concern is the effect that the environmental movement might have on the amount of growth. While there have been many advances in technology which make producing these resources more environmentally friendly, there has been recently a noticeable increase in gas flaring. This is one matter that has environmental groups with powerful support raising concerns about the continuing impact on public health and the environment.
A recent report shows that, despite environmental concerns and the fact that flaring is a huge waste of resources, (more than $100 million per month is burned off in the Bakken alone), flaring is on the rise worldwide. According to the World Bank, there was a 2 billion cubic metre (bcm) increase in flared gas in 2011 compared to the year previous, and each year it has been rising. The U.S., Russia, Kazakhstan and Venezuela were the biggest contributors to the rise.
This kind of activity is that upon which environmentalists seize, and could create enough backlash to stifle some of the potential growth.
Another concern is the availability of skilled workers who can make this happen. Besides the fact that more younger people eschew manual labor in favor of high tech jobs, even if all of them were willing to get down and dirty in the oil and gas fields, there probably will not be enough of them to fill the need. Throughout North America, the population is aging and, according to Alan Beaulieu of ITR Economics, the number of people over 65 in the next 25 years will double. For the first time in our history, more people will be over 55 than under the age of 18. What effect will workforce issues have on the potential for unconventional oil and gas to grow the economy?
It’s impossible to say at this point and there are many other factors that could dull the shine off the silver spoon promised by unconventional oil and gas. Like… what if the rest of the world taps into its similar resources? We lose our edge again.
For now, though, it’s time to grab the brass ring and ride that boom all the way to the bank. We can sort the rest of it out later. Hopefully.