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The development of natural gas and petroleum from shale is one of five catalysts for dramatic growth in a U.S. economy still trapped in the downdraft of the Great Recession, according to a new report issued by the McKinsey Global Institute.
Shale gas and oil, along with opportunities in trade, technology, infrastructure and talent development, are game changers that can quickly create jobs and deliver a substantial boost to GDP by 2020, the MGI report said. The report’s bottom line:
[quote]If the United States fully realizes the opportunity, shale energy could revitalize the oil and gas industry, have downstream benefits for energy-intensive manufacturing, and send ripple effects across the economy.[/quote]
Spurred on by new drilling techniques, North American output of natural gas from shale grew 51 percent annually from 2007 to 2012, the MGI study said. The surge in natural gas production from shale has reduced the price of natural gas from $13 per MMBtu in 2008 to approximately $4 per MMBTU in the spring of 2013 and much lower than prices elsewhere around the world, the report said.
Despite the overwhelming economic benefits resulting from responsible drilling practices, some state regulators — and New York’s in particular — are still debating their stance on hydraulic fracturing. As Kelly Riddell wrote in the Times Union last Sunday:
[quote]The anti-fracking movement seems to be gathering momentum… That’s too bad. Upstate New York is in economic crisis and drilling offers a path to recovery.[/quote]
It’s not just New York, which boasts the largest untapped Marcellus Shale gas reserves in the region.
The shale boom is boosting trade competitiveness, particularly in energy-intensive manufacturing, as the shift in input costs caused by cheap natural gas has made the United States a more attractive place to base production.
The MGI report also emphasized the economic benefits of natural gas and oil from shale:
[quote]We estimate that it could add 2 to 4 percent ($380 billion to $690 billion) to annual GDP and create up to 1.7 million permanent jobs by 2020. This could be an important source of high-wage employment for workers without college degrees, generating economic activity in parts of the country that have seen little investment in recent decades.[/quote]
Lower energy costs are already breathing new life into energy-intensive manufacturers such as petrochemicals, fertilizers and synthetic resins; iron and steel; and glass, paper and pulp, and plastics packaging. “Annual GDP in manufacturing could rise by $55 billion to $85 billion,” according to the MGI report. It added that the ripple effect in construction, the service industries, transportation and other sectors could add another $210 billion to $380 billion in annual GDP.
For the chemical industry, the glorious future forecasted by McKinsey has already arrived. Data compiled by the American Chemistry Council demonstrate that the decisive competitive advantage provided by affordable and abundant supplies of natural gas is fueling a manufacturing renaissance.
Dozens of chemical companies have announced almost 121projects representing planned investments totaling more than $83billion in the United States. America is proving a magnet for foreign investment. Half of the announced investments are from firms based outside the United States.
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