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Research & Commentary: Fracking Has Turned U.S. into Global Leader in Petroleum and Natural Gas Production

August 30, 2019

Petroleum Production Jumped 16 Percent In 2018, Natural Gas Production By 12 percent

New data released in late August by the U.S. Energy Information Administration (EIA) shows the United States, already the world’s leading producer of natural gas, is also now the world’s leading producer of petroleum, passing Saudi Arabia.

Petroleum production jumped 16 percent in 2018, while natural gas production increased by 12 percent. “Last year’s increase in the United States was one of the largest absolute petroleum and natural gas production increases from a single country in history,” the EIA report notes. In 2018, EIA data show U.S. crude oil production grew 18 percent, to a record 10.96 million barrels per day, passing the previous record set in 1970.

At the same time that EIA notes oil and gas production are at record levels, the Environmental Protection Agency (EPA) notes greenhouse gas (GHG) emissions are down 12 percent since 2005. The 2018 Greenhouse Gas Inventory (GHGI), released in April 2019, revealed GHG emissions in the U.S. decreased by 35.6 million metric tons of CO2 equivalent, or 0.5 percent from 2016 to 2017. U.S. GHG emissions are now at their lowest levels since 1992 and only 1.3 percent higher than their 1990 levels.

All of this is primarily due to the hydraulic fracturing (or “fracking”) revolution of the past decade. Fracking is the process of extracting natural gas and oil trapped in layers of shale, which are typically more than a mile below Earth’s surface. Unfortunately, fracking has been maligned in the public because of numerous false health and safety claims spouted by fracking opponents. These claims are completely untrue. However, policymakers in several states have placed burdensome and unnecessary restrictions on fracking anyways. Some states have even banned fracking, which increases costs for consumers, especially for those low-income consumers. This also retards economic growth.

Quite simply, despite opposition, fracking has transformed the nation’s long-term energy outlook and turned the United States into the world’s largest energy producer. According to the Federal Reserve Bank of Dallas, the shale industry alone drove 10 percent of U.S. GDP from 2010 to 2015. In 2018, according to the National Bureau of Economic Research, oil and gas extraction accounted for $218 billion of U.S. economic output.

The economic benefits from fracking are also experienced at more microeconomic levels. A study published in the American Economic Review in April 2017 found “each million dollars of new [oil and gas] production produces $80,000 in wage income and $132,000 in royalty and business income within a county. Within 100 miles, one million dollars of new production generates $257,000 in wages and $286,000 in royalty and business income.”

2016 study from researchers at the University of Chicago, Princeton University, and the Massachusetts Institute of Technology examined nine different shale basins, “the most comprehensive assessment to date,” according to the authors. Using a “willingness-to-pay” metric, the study found hydraulic fracturing activity brings $1,300 to $1,900 in annual benefits to local households, totaling roughly $64 billion in yearly household benefits for those living in the nine basins studied. These benefits include a “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 the authors, “Local government revenues also increased at a faster pace than expenditures.”

Hydraulic fracturing has enabled American energy companies to produce abundant amounts of oil and natural gas. Even better, fracking can ensure the United States is the world’s largest energy producer well beyond the 21st century. Therefore, policymakers should not put unnecessary and detrimental regulations on the natural gas and oil industries, which are safe, responsible, and have had an enormous positive impact on the economy at the macro and micro levels.

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

Inventory of U.S. Greenhouse Gas Emissions and Sinks 1990-2017
https://www.epa.gov/sites/production/files/2019-04/documents/us-ghg-inventory-2019-main-text.pdf
EPA’s Greenhouse Gas Inventory provides a broad overview of all U.S. greenhouse gas emissions sources and sinks, introduces key concepts, and discusses the primary drivers for changes in greenhouse gas emissions. The 2018 version finds greenhouse gas emissions decreased by 0.5 percent from 2016 to 2017 and are now just 1.3 percent above 1990 levels.

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.

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 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.

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 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.

What If … Hydraulic Fracturing Was Banned?
https://www.heartland.org/publications-resources/publications/what-if-hydraulic-fracturing-was-banned
This study is the fourth in a series of studies produced by the U.S. Chamber of Commerce’s Institute for 21st Century Energy. It examines what a nationwide ban on hydraulic fracturing would entail. The report’s authors found by 2022, a ban would cause 14.8 million jobs to “evaporate,” almost double gasoline and electricity prices, and increase natural gas prices by 400 percent. Moreover, cost of living expenses would increase by nearly $4,000 per family, household incomes would be reduced by $873 billion, and GDP would be reduced by $1.6 trillion.

What If … America’s Energy Renaissance Never Happened?
https://www.heartland.org/publications-resources/publications/what-ifamericas-energy-renaissance-never-actually-happened
This report by the U.S. Chamber of Commerce’s Institute for 21st Century Energy examines the impact the development of shale oil and gas has had on the United States. The report’s authors found that without the fracking-related “energy renaissance,” 4.3 million jobs in the United States may not have ever been created and $548 billion in annual GDP would have been lost since 2009. The report also found electricity prices would be 31 percent higher and gasoline prices 43 percent higher.

The 100 Percent Renewable Energy Myth
https://www.instituteforenergyresearch.org/wp-content/uploads/2019/02/Renewable-Myth-Policy-Brief219.pdf
This Policy Brief from the Institute for Energy Research argues that a countrywide 100 percent renewable plan would put the U.S. economy in jeopardy. The brief investigates the intermittency, land requirements, capacity factors, and cost of transition and construction materials that limit the ability of the U.S. to adapt to 100 percent renewable energy.

Legislating Energy Poverty: A Case Study of How California’s and New York’s Climate Change Policies Are Increasing Energy Costs and Hurting the Economy
https://www.pacificresearch.org/wp-content/uploads/2018/12/LegislatingEnergy_F_Web.pdf
This analysis from Wayne Winegarden of the Pacific Research Institute shows the big government approach to fighting climate change taken by California and New York hits working class and minority communities the hardest. The paper reviews the impact of global warming policies adopted in California and New York, such as unrealistic renewable energy goals, strict low carbon fuel standards, and costly subsidies for buying higher-priced electric cars and installing solar panels. The report finds that, collectively, these expensive and burdensome policies are dramatically increasing the energy burdens of their respective state residents.

 

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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