Fracking and Local Economies

 

Tony Vanetik Fracking

Despite having its roots in US energy production dating back to the early 1900s, fracking has long been looked at as an unconventional and perhaps temporary means of producing natural gas and oil within the United States.

I’ve written in the past on TonyVanetik.com about how fracking was conceived and how the process actually plays out, disspelling some of the fears around the process of collecting oil and gas within the United States. For at least 65 years, it has been used in a commercial capacity, helping to reduce the United States’ dependence on foreign oils and spur on the surge in domestic energy production. While the process does present environmental concerns when done at enormously high volumes, fracking has allowed for tremendous increases in US energy, revolutionizing the energy industry as a whole.

Fracking has reduced the cost of energy production hugely across the nation–the so called fracking revolution has caused gas prices to drop by about 47% according to Brookings. Fracking wells as a whole produced the good majority of US natural gas across the nation–two third according to the Energy Information Association.

In short, the fracking boom has hugely influenced the US economy and energy production. Few people will debate the large-scale economic benefits of increasing nationwide fracking, environmental concerns aside. But how does fracking affect local economies?

Even in scenarios in which the national economy is bouncing back or doing well at large, there are always struggling local economies. Without a booming populous or a bustling business center, some small cities and towns struggle to keep themselves afloat. Fracking, though, in areas in which shale is a valuable resource, can be the answer.

According to two Duke energy experts who studied the matter, fracking’s local benefits are enormous and unparalleled. The local government in Weld County, home to the largest shale deposit in Colorado, has brought in $110 million in property tax revenue since the shale boom. This money, combined with severance tax allocations from the government has allowed Weld County to put millions back into the school system, strengthen the police and local businesses, and rebuild roads within the county.

Weld County isn’t an exception either, similar benefits in local economies have been recognized almost universally where fracking is found. With the continued pressure to strive for energy independence within the United States, fracking is likely here to stay, much to the benefit of the economy at both the micro and macro levels.

Will the US Ever Achieve Energy Independence?

Depending largely on who you believe, where you’re getting your information and what you’d like to hear, the United States could be on the verge of turning completely energy independent in the near future. Or, on the other hand, it could not.

It seems as though every week a new article pops up online either detailing why the US will be energy independent in the next few years, then later claiming it’s a bit further from that, then claiming it will never happen, then claiming that it may, in fact, happen. This is because, in the most straightforward of terms, no one really knows.

The Case for Independence 

I’ve touched on the potential for America’s energy independence briefly in the past on my blog here.

The price volatility of oil has had an enormous impact on the state of the United States economy. The less we have to rely on foreign nations (primarily in the Middle East) for their oil production, the more stable our own economy can grow, further utilizing the energy sources domestically. Additionally, energy independence would theoretically solve issues regarding national security and the military. While 100 percent energy independence is quite the task, moving towards independence even short of the 100 percent metric is important nonetheless.

“For the U.S. to have more options and be more independent, it reduces our national security vulnerability and makes more oil available to the rest of the world, which enhances geopolitical stability to the rest of the world,” said Mike Ming, Oklahoma Energy Secretary.

With the oil and fracking booms that the United States has seen explode in recent years, our dependence on foreign oil is dropping drastically. Oil imports have shrunk from 61 percent in 2005 to about 28 percent in 2015. Some suggest that that number could push single-digits within the next few years. In April of 2015, some experts forecasted that the US could be independent as soon as 2019; while that may seem like a far cry from where we sit now, additional vehicles of independence, like solar power and wind power are champing at the bit to become the US’s new source of energy.

Why It May Not Happen

Some, including The Street and The Atlantic, do not see energy independence in America’s future at all. The big player in this train of thought is simple: the price of American energy. While the US is one of the three biggest oil producers in the world, we are also one of the more expensive. While Middle East OPEC countries continue to produce oil at cheaper prices, the US is wise to remain oil dependent for at least the foreseeable future. The oil market is, simply put, not stable enough for America to ever comfortable fall into complete energy independence. As one of the largest users of oil in the world as well, the US needs to first examine its usage and where that can be cut back before we can set sights on energy independence.

 

 

What Affects Gas Prices?

According to the Los Angeles Times, there are approximately 253 million cars and trucks motoring down highways, coasting through scenic country roads, and experiencing the frustration of stop and go city traffic across the United States. Recent census data indicates there are about 242 million adults in the United States right now, meaning there are about 1.05 cars per adult in the US. That means, if you’re reading this, there’s a good chance you drive fairly regularly, and a good chance that you, like so many others, monitor gas prices.

 

Most people seem to keep a fairly cursory watch over world happenings when it comes to things like the price of crude oil. Few people who live outside of the world of economics, government or politics keep close tabs on OPEC or oil reserves and limits. What many do follow, quite stringently in fact, is the price of gasoline around them.

 

Current prices, just about $2.12 per gallon nationally, is the lowest prices have fallen in inflation-adjusted dollars since about 2002. While state to state prices differ greatly–from about $2.734 per gallon in Hawaii to $1.821 in South Carolina–the national average remains at one of the lowest prices we’ve seen in decades.

 

So who or what is to blame (or thank, perhaps) for low gas prices around the country? Many people look solely at the price of crude oil per barrel when determining the price of gasoline, though this doesn’t paint an entirely accurate picture. Oil is currently hovering around $42-$45 a barrel, though that’s not the only determiner for the prices of gasoline in America.

 

In recent years, the price of crude oil has actually had less of an impact on the price of gasoline as it has in the past according to the Energy Information Agency. Distribution and marketing costs, the costs of refining that oil, and taxes have all began contributing more to the price of gasoline in the last year as crude oil prices have become less impactful.

 

Another portion of the gas prices comes from our consumption, which is up this year, and threatens to break the all-time single year consumption record. This is the same reason that we also see gas prices rise during the summer: with the warm months comes more road trips, more driving, and more demand for gasoline. Simple supply and demand denotes that, with larger demand for gas by US drivers would come an accompanying rise in prices if the supply doesn’t increase at a comparable rate.

 

Carbon Emissions and Climate Change

carbon emissions

 

For a long, long time, it was the one thing on the mind of almost everyone across the country–and the world–almost endlessly. It spawned feature-length documentaries, endless scientific studies and debate after debate. The hole in the ozone was the paramount concern of environmentalists everywhere for years. And now the concern has seemingly disappeared as the hole is headed in a better direction thanks to huge action on the part of nations all over the world. Now, how will action taken to combat climate change affect the Earth?

 

The so called fracking boom in the United States has slowed as oil prices have dropped. In February of this year, it was reported that the number of natural gas rigs in the US has been dropping steadily for quite some time now. It’s been well-established by studies and backed by President Obama that natural gas has a smaller negative impact on our environment than oil and coal. So when the fracking boom reached its height, murmurs of the US’s energy independence began to grow louder. Talks of the relationship between less foreign dependence and lower carbon emissions have been abound, spurring headlines speaking to the possibility of imminent US energy independence.

 

But recent studies have indicated that mitigating climate change may not be quite as simple as gaining energy independence from other countries.

 

The study, published on June 7th from the Universiteit van Amsterdam is titled in fairly conclusive language, “Pursuing energy independence will hardly mitigate climate change.” According to Bob van der Zwaan, who is cited in the study, “This study refutes the idea that a policy focusing on energy independence more or less automatically results in sufficient reduction of greenhouse gases.”

 

The key, according to van der Zwaan, a professor of Sustainable Energy Technology at Universiteit van Amsterdam is reducing emissions as a whole. “In planning future energy systems, countries can best focus on technology that contributes to both emissions reductions and energy independence, although the emphasis should always be on technology lowering humankind’s carbon footprint.’”

 

In order to enact the level of change we saw with the ozone layer’s seeming reversal of fate a decade or so ago, larger-scale change will be necessary, more directly related to renewable energy. Natural gas, despite being better for the environment (perhaps “less bad” would be a better way of putting it) is still at its core a nonrenewable energy source. So while the US may lead all nations on Earth in terms of its natural gas usage, the nation ranks 10th in terms of renewable energy use.

 

The 14 percent of electricity that was generated by renewable sources in 2014 pales in comparison to countries like Scotland or Costa Rica whose 97 and 99 percent renewable sources rank them numbers three and two in the world. Sweden recently became the first fossil fuel independent nation recently, setting the bar high for the US.

 

Political leaders tend to be torn on the subject. Typically, those on the right tend to lean towards a reliance on fossil fuels, considering green energy to be a waste of time, money and effort on our behalf. Those on the left, in contrast, often put a higher priority in switching from fossil fuels to natural gas, then to completely green and renewable energy. Few from either side of the political spectrum, however, have concrete plans as to how our reliance on their energy-source of choice will be implemented, and how it will affect our planet.

 

How Fracking is Revolutionizing US Energy

A hot-button subject during presidential debates not only this primary season, but during every US election year in the last few centuries has been our dependance on foreign oil. This is, of course, because of the ever-fluctuating price of oil from Middle-East members of OPEC and our dependance as a nation on oil as an energy source. Now hydraulic fracturing or “fracking” is taking the front seat as a debated subject and a means of self sufficiency for US energy.

By 1989, the United State’s dependence on foreign oil was at 47. By 2006, oil imports peaked at 60 percent. Since then, however, the United States has begun to slowly but surely wriggle free from the clutches of its dependance on foreign oil as a means of energy, capped off by President Obama’s pushes to “free ourselves from foreign oil” in 2012.

Currently, our dependance on foreign oils continues to drop since its peak in the mid 2000s. Partially to thank for this is fracking.

Hydraulic fracturing may be the answer to the United States becoming completely energy self-sufficient in the next few decades. The process is fairly straightforward and has been refined and improved over time, eventually rising to the point of being the most efficient means of collecting natural gas in existence.

To start the process, a large drill bores its way into the earth over a natural gas deposit. From there, a pressurized liquid is injected into the rock, fracturing it and allowing the natural gas contained within it to be released. Though the process started with mostly vertical drilling processes, recent exploration of horizontal drilling has allowed fracking to capture an even higher amount of natural gas, thereby increasing the overall productivity and efficiency of the project.

The liquid injected in the process involves several different agents, typically a mixture of sand, water and chemicals. The sand is useful in holding the fissures open after the pressure has been released, allowing more gas to leak out and be collected.

Fracking is hardly a new technology, as its roots can be traced back as far as the early 1900s. The first commercial fracking processes came into existence around 1940 and were explored and studied thoroughly. Despite getting its start decades ago, fracking has only in recent years become as efficient and widely-applicable as it is now.

High oil prices from Saudi Arabia and the rest of OPEC played a large part in the fracking boom in the US in recent years. Now, other parts of the world, including the UK are opening their collective minds to the idea of fracking as a means of switching to natural gas & self-sufficiency.

Recently, the process was approved in the UK for the first time since 2011. This may seem like small news to some, but it’s a key indicator that the world as a whole has taken notice of the advantages that fracking can have on a country, its economy and its efficiency. 

 

Oil may be in a Slump, but the US can Stay Active

American oil isn’t what it used to be, for better or for worse. Recently, NPR’s Michel Martin sat down with famed oil businessman T. Boone Pickens, and picked his brain on the state of oil in the USA.

Saying “things aren’t good” oil-wise is a bit of an understatement. For the fifth time since 1980, oil prices have been reduced by over half. In the past, this was usually corrected by Saudi Arabia over supplying oil. Most recently, the price of oil has been in free fall— it plummeted from $100 to just over a quarter of that value. At $26 a barrel, the oil producing powers that be of Saudi Arabia and Russia have left the US on it’s own. In order to fix this, oil production has been drastically cut. In just a few years, the number of oil rigs was decreased from 1,609 to 342.

Pickens is convinced though, that oil will make a comeback. The problem though, is that he’s unsure of when that will be. But the industry doesn’t have to roll over completely and just wait it out. Pickens encourages an active exploration into clean energy sources. Wind and solar resources are abundant in America, he says, and the fact that so little of that energy output is used for transportation indicates a source of huge potential. This not only keeps the domestic economy humming, but will increasingly keep OPEC irrelevant. However, because we use so much oil— 94 million barrels— it’s hard for him to envision a world where that fossil fuel is suddenly pulled out from under us and wind and solar take the reigns.