Current Event Post: U.S. Fossil Fuel Industry Rebounds

U.S. Fossil Fuels Industry Rebounds

In a stagnated economy hoping for any well spring of job development, the fossil fuels industry is offering a light to guide the way in the coming years.  In blog posted by Mark J. Perry, a University of Michigan economics professor, data from the U.S. Energy Information Administration indicated significant growth in U.S. energy production from oil, coal and natural gas since 2009.  It appears that much of this growth is directly attributable to technological advances including hydraulic fracturing and horizontal drilling.  Perry wrote that these advancements “…have allowed us to tap into previously inaccessible underground oceans of domestic oil and gas trapped inside shale rock far below the earth’s surface.” (Sebastian) 

The use of this technology is not cheap.  Initial investments can be as much as ten times more expensive than a similar traditional well.  However, the payoff continues for a longer term.   Because the supply chain for oil and gas drilling is very long, and mostly domestic, the trickledown effect on the economy is vast.  IHS, a global information company, published in a recent Global Insight Study that the increase in unconventional oil and gas drilling will bring more than $5 trillion in capital spending that will support more than 3.5 million jobs by within the next twenty years. (Dlouhy)

Aside from the boost to the domestic economy, oil production from shale has had another effect.  Oil production in the Gulf of Mexico continues to fall as a percentage of total U.S. output.  In the past, when a hurricane enters the Gulf, oil rigs shut down and prices soar.  Shale extraction is proving to stabilize the hurricane issue as proven at the end of August when hurricane Isaac shut down Gulf production for more than a week.  Compared to a few years ago when hurricane Katrina caused oil prices to jump to $130 a barrel, stemming 95% of Gulf production during Isaac caused no appreciable change in the price of crude. (Zhou)

Technological advancements in gas and oil drilling have lead to a dramatic increase in U.S. fossil fuel production.  Coupling this increase with diminished domestic fossil fuel usage in recent years positions the United States as a major player in the world reserve and decreases U.S. dependence on foreign oil.  Moreover, it increases domestic economic development and limits disruption in the market due to late summer tropical storm activity.  This allows managers to better plan for long term activities independent of massive fluctuation in crude oil prices. 

Sebastian, Simone. "U.S. on track to produce record fossil fuel energy." Houston Chronicle 25 10 2012, D3. Print.

Dlouhy, Jennifer. "A potent economic force: Study says energy from shale is a bonanza for future jobs." Houston Chronicle 23 10 2012, B6. Print.

Zhou, Moming. "Storm Effects on Oil Prices Waning As Shale Booms: Energy Markets." Bloomberg (2012): n.pag. Bloomberg.com. Web. 28 Oct 2012. <http://www.bloomberg.com/news/2012-09-14/storm-effect-on-oil-prices-waning-as-shale-booms-energy-markets.html>.