US’ unconventional gas and oil revolution to increase average American household incomes of $2,000 a year by 2015, say analysts
By Paul Brown
A study predicting a huge boom for the US as a result of the exploitation of new sources of “unconventional” gas and oil fails to mention its effect on the climate.
Americans will be a lot richer as a result of what analysts call the “unconventional oil and gas revolution” boosting jobs and reviving energy-intensive industries, according to a series of detailed reports.
The reports, compiled by IHS, a US company operating in 31 countries specialising in business, energy and economics, says cheaper oil and gas will transform the fortunes of many companies and has already boosted the income of the average American household by $1,200 a year.
This will rise to $2,000 a year by 2015 and $3,500 a year by 2025 because of lower energy bills and reduced prices for everyday goods.
But the reports, a series of three on “America’s new energy future”, make no mention of the effect this oil and gas boom will have on climate change, although it is clear that emissions of greenhouse gases will increase substantially if its predictions are correct.
The reports say there will be large reductions in energy imports and increased global competitiveness for American-based energy-intensive industries, particularly the production of chemicals, many of which are derived from oil and gas. Others receiving a boost include aluminum smelting, glass, cement, and the food industry.
The study says the extraction of oil and gas from shale rocks by fracturing them underground, a process known as “fracking”, currently supports 377,000 jobs in the US, rising to 2.1 million if you add in all the associated jobs. This will rise to 3.3 million by 2020 if the existing boom continues.
“The unconventional oil and gas revolution is not only an energy story, it is also a very big economic story that flows throughout the US economy in a way that is only now becoming apparent,” said Daniel Yergin, IHS vice-chairman and author of The Quest: Energy, Security and the Remaking of the Modern World.
“In addition to significant job and economic impacts from energy production and its extensive supply chains, the growth of long-term, low-cost energy supplies is benefiting households and helping to revitalise US manufacturing, creating a competitive advantage for US industry and for the United States itself.”
One of the effects of the unconventional oil and gas revolution, as the three reports note, is to substantially reduce the price of gas. This has led to a cut in the amount of coal used in power stations and so lowered the United States’ overall carbon emissions.
The US Environmental Protection Agency says that in 2011 the nation’s greenhouse gas emissions were 6.9% below 2005 levels. While this was partly due to the recession there was also a drop of 1.6% between 2010 and 2011, for which the shale gas revolution is likely to have been the primary cause.
One of the side effects of using less coal in America is that much more is available for export to countries where gas is still expensive. An example is the United Kingdom, where cheap US coal was burned to produce electricity in 2012, pushing up the country’s total emissions by 4.5% in a single year.
This statistic probably explains why the British Government is giving tax breaks to British firms in the hope that they too can produce cheap shale gas. Natural gas produces 45% less carbon dioxide than coal for the same quantity of heat.
It is these substantially lower emissions that make the switch from coal to gas so attractive to politicians and those seeking immediate reductions in the release of greenhouse gases.
In the short term a switch means there is no need to make any difficult decisions and everyone can be kept happy while at the same time being able to look good with substantial emission reductions.
Overall though, as the shale gas revolution has shown, while the gas can temporarily reduce US emissions, it can, at the same time, increase those of other countries by inducing them to burn more coal.
And if Mark Wegenka, managing director, chemical consulting at IHS is correct, then the petrochemical industry in America will grow fast and so dramatically increase US emissions too.
He said that until recently there had been a spiral of job losses and plant closures, but now there had been a complete turnaround. He expects the industry to create more than 200,000 energy-intensive jobs because of the fracking boom.
What all this will do to America’s overall carbon emissions is not certain, but any gains because of vehicle efficiency and the adoption of renewables are likely to be wiped out by cheaper fossil fuels and industrial expansion.
Despite this, China is likely to remain a long way ahead of America in overall carbon emissions. The country emitted 9,700,000 tonnes of carbon to the atmosphere in 2011 compared with the US’s 5,420,000.
However, it is the Chinese, with their related terrible air pollution problems, who seem more interested in taking action on climate change. They are now the world’s largest producer of renewables and building new nuclear stations.
On the downside, they are also looking at fracking in their northern desert areas while continuing to fill the energy gap by importing cheap American coal.
The Americans have never had a government able to consider any binding greenhouse gas targets since George Bush repudiated the Kyoto agreement when taking over as president from Bill Clinton.
In the middle of a fracking boom they are going to find it even harder to reach agreement on an international treaty to tackle climate change.
This article was produced by the Climate News Network.