The Real Stimulus: Low-Cost Natural Gas

NCPA October 30, 2012

The United States is experiencing a revolution in oil and gas. Half a decade ago, it was assumed that the United States would become a large importer of liquefied natural gas; now the domestic natural gas market is oversupplied, thanks to the ability to produce shale gas through hydraulic fracturing and horizontal drilling technologies, says Daniel Yergin, vice chairman of IHS, a global market information and analytics company.

• Shale gas is now 10 percent of the overall U.S. energy supply.
• As many as 1.7 million new jobs have been created.
• In addition, the energy revolution is expected to add $62 billion to federal and state revenues this year.
• This growth in shale gas will save the United States from spending $100 billion on imported liquefied natural gas (LNG).

Manufacturing is also experiencing a surge because of the increased oil and gas production. Chemical companies that have been leaving the United States for years are now returning to invest in new factories because of inexpensive and stable supplies of natural gas.

While the uptick in oil and natural gas production has clear economic impacts, less is known about the geopolitical implications. For example, because of the increase in oil production, the United States has been able to supplant Iranian oil exports, which are necessary in maintaining credible sanctions.

With respect to international trading, there are debates about the United States becoming a major exporter of LNG. Opponents of LNG exports argue that domestic prices of natural gas would increase; but American LNG exports would be limited by competition from other producers around the world. More importantly, the United States could trade with allies, like Japan, which the United States has already pressured to limit its oil imports from Iran.

One source of concern has been the environmental impacts associated with the increased oil and gas production and methods for extraction. However, the secretary of energy created a committee that identified the three major concerns -- wastewater, air pollution, and impact on community -- and came up with solutions to solve the problems.

Source: Daniel Yergin, "The Real Stimulus: Low-Cost Natural Gas," Wall Street Journal, October 22, 2012.