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Research & Commentary: Ending Fracking in Texas Would Trigger Recession

March 25, 2020

Over Three Million Jobs Lost And $1.5 Trillion In Lost GDP By 2025 If Fracking Banned In The Lone Star State

report released in November 2019 by the Global Energy Institute at the U.S. Chamber of Commerce details how a ban on hydraulic fracturing (colloquially known as “fracking”) would have devastating consequences for the Texas economy and would displace millions of jobs throughout the state.

Although the prospects of any such ban taking place in a state as energy-friendly as Texas are somewhere in the vicinity of nonexistent, it is important to highlight just exactly what would happen if such a ban were to take place, which would be the devastation of the state’s economy. Even worse, it would most likely trigger an economic recession across the entire United States.

According to the study, if a fracking ban took place, the Lone Star State would experience the cumulative loss of 3.2 million jobs thanks to higher residential and business energy costs and upstream production losses, as well as $1.5 trillion in lost gross domestic product (GDP), and a $106.6 billion loss in state and local tax revenues by 2025. Over that same period, Texas households would experience a $794 billion loss of income and Texans would suffer a per capita cost-of-living increase of $7,280.

These losses would naturally begin taking effect immediately. In 2021 alone, the study estimates 656,000 job losses, $124 billion in lost GDP, $8.6 billion in lost state and local tax revenue, and a $63 billion loss in household income.

2020 report from the American Petroleum Institute (API), with modeling data provided by the consulting firm OnLocation, has unemployment numbers in Texas due to a fracking ban that mirror GEI’s study, with 1.1 million lost jobs in 2022 alone.

Texas is the country’s leading producer of both natural gas and crude oil. This massive increase in domestic shale development, led by fracking, has caused natural gas prices to plummet in Texas, saving state residents and businesses more than $60 billion from 2006 to 2016, according to a 2018 study from the Consumer Energy Alliance.

It should come as no surprise that shale development is spurring economic growth across Texas. Fracking delivers $1,300 to $1,900 in annual benefits to local households, including “a 7 percent increase in average income, driven by rises in wages and royalty payments, a 10 percent increase in employment, and a 6 percent increase in housing prices,” according to a December 2016 study conducted by researchers at the University of Chicago, Princeton University, and the Massachusetts Institute of Technology. 

The oil and natural gas industries supported more than 1,985,000 jobs in Texas—about 12 percent of the state total—in 2015. These vital industries produced more than $180 billion in labor income and $326 billion in economic impact, according to a 2017 API study prepared by PricewaterhouseCoopers.

Fracking enables the cost-effective extraction of once-inaccessible oil and natural gas deposits. These energy sources are abundant, inexpensive, environmentally safe, and can ensure the United States remains a leading energy producer well beyond the twenty-first century. Therefore, Texas policymakers should refrain from placing unnecessary burdens on the natural gas and oil industries, which are safe and positively impact the Lone Star State’s robust economy.

The following documents provide more information on hydraulic fracturing and fossil fuels.

What If…Hydraulic Fracturing Were Banned? (2020 Edition)
https://www.globalenergyinstitute.org/sites/default/files/2019-12/hf_ban_report_final.pdf
This study from the Global Energy Institute at the U.S. Chamber of Commerce says a ban on fracking in the United States would be catastrophic for our economy. Their analysis shows that if such a ban were imposed in 2021, by 2025 it would eliminate 19 million jobs and reduce U.S. Gross Domestic Product by $7.1 trillion. Tax revenue at the local, state, and federal levels would decline by nearly a combined $1.9 trillion. Natural gas prices would leap by 324 percent, causing household energy bills to more than quadruple. By 2025, motorists would pay twice as much at the pump for gasoline as oil prices spike to $130 per barrel, while less domestic energy production would also mean less energy security.

America’s Progress at Risk: An Economic Analysis of a Ban on Fracking and Federal Leasing for Natural Gas and Oil Development
https://www.api.org/~/media/Files/Oil-and-Natural-Gas/Hydraulic-Fracturing/2020/fracking-ban-study-americas-progress-at-risk.pdf
The study from the American Petroleum Institute (conducted by economic modeling firm OnLocation)  warns that banning federal leasing and fracking on public and private lands, which some presidential candidates have proposed, would cost up to 7.5 million American jobs in 2022 alone, lead to a cumulative GDP loss of $7.1 trillion by 2030, slash household incomes by $5,400 annually, increase household energy costs by more than $600 per year and reduce farm incomes by 43 percent due to higher energy costs. If a ban is enacted, the U.S. would flip from being a net exporter of oil and petroleum products to importing more than 40 percent of supplies by 2030.

Oil and Natural Gas Light the Way for Texans
https://consumerenergyalliance.org/cms/wp-content/uploads/2018/10/CEA-TX-Report-101218.pdf
This report from the Consumer Energy Alliance examined how the shale revolution across Texas has provided benefits to Lone Star State residents by boosting disposable income and revitalizing communities, saving residential users $7.2 billion, and commercial and industrial users $52 billion.

Debunking Four Persistent Myths about Hydraulic Fracturing
https://www.heartland.org/publications-resources/publications/debunking-four-persistent-myths-about-hydraulic-fracturing
This Heartland Institute Policy Brief by Policy Analyst Timothy Benson and former Heartland communications intern Linnea Lueken outlines the basic elements of the fracking process and then refutes the four most widespread fracking myths, providing lawmakers and the public with the research and data they need to make informed decisions about hydraulic fracturing.

The Local Economic and Welfare Consequences of Hydraulic Fracturing
https://www.heartland.org/publications-resources/publications/the-local-economic-and-welfare-consequences-of-hydraulic-fracturing
This comprehensive study published by the National Bureau of Economic Research says fracking brings, on average, $1,300 to $1,900 in annual benefits to local households, including a 7 percent increase in average income, a 10 percent increase in employment, and a 6 percent increase in housing prices.

Impacts of the Natural Gas and Oil Industry on the U.S. Economy in 2015
https://www.heartland.org/publications-resources/publications/impacts-of-the-natural-gas-and-oil-industry-on-the-us-economy-in-2015
This study, conducted by PricewaterhouseCoopers and commissioned by the American Petroleum Institute, shows that the natural gas and oil industry supported 10.3 million U.S. jobs in 2015. According to the Bureau of Labor Statistics, the average wage paid by the natural gas and oil industry, excluding retail station jobs, was $101,181 in 2016, which is nearly 90 percent more than the national average. The study also shows the natural gas and oil industry has had widespread impacts in each of the 50 states.

The U.S. Leads the World in Clean Air: The Case for Environmental Optimism
https://files.texaspolicy.com/uploads/2018/11/27165514/2018-11-RR-US-Leads-the-World-in-Clean-Air-ACEE-White.pdf
This paper from the Texas Public Policy Foundation examines how the United States achieved robust economic growth while dramatically reducing emissions of air pollutants. The paper states that these achievements should be celebrated as a public policy success story, but instead the prevailing narrative among political and environmental leaders is one of environmental decline that can only be reversed with a more stringent regulatory approach. Instead, the paper urges for the data to be considered and applied to the narrative.

Climate Change Reconsidered II: Fossil Fuels – Summary for Policymakers
https://www.heartland.org/publications-resources/publications/climate-change-reconsidered-ii-fossil-fuels---summary-for-policymakers
In this fifth volume of the Climate Change Reconsidered series, 117 scientists, economists, and other experts assess the costs and benefits of the use of fossil fuels by reviewing scientific and economic literature on organic chemistry, climate science, public health, economic history, human security, and theoretical studies based on integrated assessment models (IAMs) and cost-benefit analysis (CBA).

The Social Benefits of Fossil Fuels
https://www.heartland.org/publications-resources/publications/the-social-benefits-of-fossil-fuels
This Heartland Policy Brief by Joseph Bast and Peter Ferrara documents the many benefits from the historic and still ongoing use of fossil fuels. Fossil fuels are lifting billions of people out of poverty, reducing all the negative effects of poverty on human health, and vastly improving human well-being and safety by powering labor-saving and life-protecting technologies, such as air conditioning, modern medicine, and cars and trucks. They are dramatically increasing the quantity of food humans produce and improving the reliability of the food supply, directly benefiting human health. Further, fossil fuel emissions are possibly contributing to a “Greening of the Earth,” benefiting all the plants and wildlife on the planet.

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Environment & Climate News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

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