‘Baby Boomlet’ Study Latest to Show Positive Economic Impact of Fracking

A new National Bureau of Economic Research (NBER) study got some considerable media attention this week for its topline conclusion that fracking is responsible for a recent “baby boomlet” in areas where shale development is taking place.

But the media glossed over some great economic data from the study, which show the shale boom has provided tremendous economic opportunities in areas where development is taking place. As the study states,

“The fracking boom of the post 2005 period led to sizable improvements in the earnings potential of non-college educated men in counties located over geological shale plays.

“The sudden shock to local economies when fracking came to their area led to increased labor demand, putting upward pressure on wages, including the wages of less educated individuals.”

As E&E News reported,

“The analysis by University of Maryland economists found that in rural parts of Texas, Wyoming, Pennsylvania and Colorado where the explosion of the hydraulic fracturing industry over the last decade created lucrative blue-collar jobs, childbearing rates rose by about 3 percent.”

Specifically, the study found:

  • An additional thousand dollars of simulated new production per capita is associated with a statistically significant 8 percent increase in average earnings for men overall, including 4.4 increase in average earnings for non-college men.
  • One thousand dollars per capita of fracking production is associated with a 6 percent increase in average earnings for men in jobs outside the oil and gas industries, including a 2.9 percent increase for non-college men.
  • Fracking production is also associated with an increase in the jobs-to-population ratio. Specifically, one thousand dollars per capita of fracking production is associated with a 2 percent increase in the number of jobs for both non-college and college educated men. (emphasis added)

It is also worth noting that the study arrived at these conclusions despite excluding data from the Bakken Shale regions of North Dakota and Montana, as study authors Melissa Kearney and Riley Wilson explained,

 “… given the unique context of fracking in the Bakken region, in particular the migration response documented in Wilson (2016), we exclude the 12 PUMA in North Dakota and Montana.”

Of course, this isn’t the only study to find major economic benefits. Here are just a few others:

  • A 2016 University of Chicago report found fracking is generating “enormous benefits” to local economies — and to average shale-area households “by roughly $1,300 to $1,900 per year.” It also found counties with a high level of fracking had up to a seven percent increase in average income driven by wage increases and other factors such as royalty payments. Employment also increased 10 percent. The group concludes “that the average local benefits from hydraulic fracturing outweigh the costs.”
  • A 2017 American Economic Review report found that every million dollars of new oil and gas extracted produces $80,000 in wage income, $132,000 in royalty payments and business income, and 0.85 jobs within the county in the year production occurs.”
  • Energy prices reached their lowest levels ever in 2016 thanks in large part to natural gas, as Americans spent just four percent of average annual household income on energy and retail electricity prices fell 2.2 percent, according to the 2017 Business Council for Sustainable Energy and Bloomberg New Energy Finance Sustainable Energy Factbook. Retail energy prices were also 3.9 percent lower than they were a decade again.
  • According to an IHS Economics and the National Association of Manufacturers (NAM) Center for Manufacturing Research report, American families saved, on average, $1,337 in 2015 through lower home energy costs as well as lower costs of goods and services as a result of the abundant supply of North American natural gas.
  • According to the American Automobile Association (AAA), Americans on average saved an average of more than $550 on gasoline costs, andthe average household saved approximately $1,000 last year (2016) due to increased production from hydraulic fracturing and horizontal drilling.
  • A 2016 study by researchers from the London School of Economics (LSE) found that for every two jobs directly created by fracking, at least one more is created in the manufacturing sector. Based on their analysis, the team was able to conclude that the shale gas revolution added more than 350,000 manufacturing jobs to the U.S. economy by 2012.

Although the headlines focused on this NBER’s study’s topline finding that fracking is growing American families, the fact that this study is just the latest evidence that the shale revolution is also growing economic opportunity should not be overlooked.

 

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