US Shale Gas Generates Jobs While Creating New Wealth – Natural Gas As Transportation Fuel Would Cut Down US Oil Imports from OPEC and Others, It Would Stimulate US Growth by Reducing the Energy Bill for American Consumers and Corporations

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By Paolo von Schirach

July 26, 2011

WASHINGTON – Many economists, including Nobel Prize winner Paul Krugman, have argued that this whole never ending, acrimonious deficit-debt ceiling-spending -taxes debate Washington is having, is really the wrong topic, reflecting a deep misunderstanding of national priorities. Yes, the debt level and future spending are important. However, massive, chronic unemployment, (now at 9.2%), is more important, as it cripples the productive capacity of the United States, while limiting growth and shrinking the tax base. So, the national debt is important; but it is not an emergency. Unemployment is an emergency.

Energy can generate new jobs

But, assuming Krugman and others are right, then what do we do to generate good jobs that help growth, while helping people? Well, new energy discoveries provide new opportunities. Remember the green economy? Well, that was a dream. At least in terms of scale and actual growth opportunities. Its day may come; but it is not here yet. So, do not count on it to mop up millions of unemployed Americans.

Shale gas

But the old fashioned natural gas industry opened new paths that increase wealth and can lead to major industrial transformations, such as natural gas powered vehicles that would create even more jobs. It is clear that American shale gas is not just a blip. The “hydraulic fracturing” technologies that allow gas trapped in rock formations to be extracted economically have proven to be transformative. So, all of a sudden, America is inundated with cheap natural gas. And it seems that we have really a lot of it. Enough to last about 100 years, according to many estimates.

Huge new investments in Pennsylvania

For an energy starved, high consumption American economy this is great news. But it is also great news for states like Pennsylvania that sit on enormous shale gas formations contained in the Marcellus shale. Consider this. Only in 2010 Pennsylvania received almost $ 18 billion fresh shale gas related investments from Shell, Chevron, Reliance and BG Group. 2,000 additional wells were drilled. By the middle of the decade the average will be 3,500 new wells a year.

The Wall Street Journal, (July 26, 2011), cited studies indicating that the new Pennsylvania gas wells generated about 72,000 new jobs in the last year and a half. The WSJ also writes that University of Wyoming professor Timothy Considine estimates that each “well generates some $ 2,8 million in direct economic benefits….$ 1,2 billion in indirect benefits from companies engaged along the supply chain, another $ 1.5 million from workers spending their wages….” Plus there are royalties paid to land owners and additional taxes paid by all to the state. So, in economically weak America gas is an economic bonanza. It drives down the cost of electricity, it creates new wealth, new revenue and plenty of high paying jobs.

Natural gas for transportation

And yet all this gas can do a lot more. But for this we would need a Washington-led public policy framework that would clearly indicate to all players that the US wants to use plentiful, cheap American natural gas as transportation fuel. The case for this switch has been convincingly made many times. T. Boone Pickens has been leading the charge, with his www.PickensPlan.com . I have supported it here in many occasions.

President Barack Obama talked about natural gas as transportation fuel in at least one major public address. But we are still missing the basic indication that this is a national priority. In other words, Washington needs to state that the US wants to convert a significant portion of its vehicles to American produced natural gas. This is eminently doable and it makes economic sense. Natural gas is plentiful, it is domestic and it is cheap. Much of, like the Marcellus shale, is located very close to tens of millions of potential end users.

Cut the oil bill, use cheaper domestic energy

You have seen above that producing gas is economically beneficial. Well, why not make it even more beneficial? If we use it for transportation, we shall import less oil. Sure enough, converting vehicles to gas is expensive. But the up front investment will be repaid by much lower fuel bills. Whereas, doing nothing means that we shall continue to be dependent on an imported, quite expensive, (around $ 100 a barrel, these days), energy source.

How complicated is this?

Consider this. Do you want to keep importing high priced oil from Africa or the Middle East, or do you want to fill your tank with natural gas from Texas or Pennsylvania at a fraction of the cost of gasoline or diesel? How complicated is this, really? Natural gas fueled trucks and cars will not solve all of our unemployment problems but they would help enormously.

We send less money abroad. We invest at home. We generate energy jobs here and we help create a new domestic motor industry that will cut down overall energy costs for millions of consumers and thousands of businesses, (not to mention emissions, as natural gas is much cleaner than gasoline). Again, how complicated is this?

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