The Macroeconomics of Fracking
The New York Times Magazine takes an economic impact look at fracking this week. Of course by fracking the Times means all things having to do with drilling for shale gas, which has made natural gas cheaper, and could very well bring more manufacturing back to the U.S.
“As examples from the last century suggest, the sudden discovery of oil and gas can transform an entire economy and regulatory system to serve the industry’s interests. Economists call this the resource curse — the perverse process in which a valuable discovery like oil, gas, diamonds or gold ends up enriching a few at the cost of impoverishing most of the population. At its worst, the resource curse leads to deeply corrupt regimes like those in Iraq, Iran, Myanmar and Libya. At its mildest, this can create one-industry economies in which there is little innovation and even less resistance to the whims of a handful of powerful interests. Many believe this already describes the oil economies of Louisiana, Texas and Oklahoma and, increasingly, North Dakota, where the fracking industry is entrenched. Politically and economically, it’s hard to argue with an industry that has helped keep the state’s unemployment rate at about 3 percent.”
The piece doesn’t address the push toward exports, or what that could mean for the manufacturing industry. StateImpact Pennsylvania recently interviewed an executive from Dow Chemical on the impact of cheap natural gas, listen to that piece here.