No president in modern American history has bashed the oil and gas industry more than Barack Obama. And none has benefited from that industry more.
Proving that last sentence is easy. It requires only that we imagine what world oil prices — and the U.S. economy — would look like in the absence of the shale gale, the multi-state surge in domestic oil and gas production of the past few years, as drillers have figured out how to produce vast quantities of methane and liquids from shale deposits.
Let’s start with oil prices. The possibility of a wider conflict in Syria has led to a surge in oil prices. They’re up by about $7 per barrel since the August 21 chemical-weapons attack in Syria. Attacks on pipeline infrastructure in Nigeria and Iraq, along with the ongoing conflict in Libya and the continuing shortfalls in Iranian production, have added further uncertainty. In August, according to the Energy Information Administration, the volume of unplanned supply disruptions in the global oil market 2.7 million barrels per day.
Luckily for Obama, U.S. oil production is soaring. Last year, it rose by about 800,000 barrels per day, the biggest annual increase since 1859. And it is expected to rise by more than 800,000 barrels per day this year, which would set another record.
No other country in the world is growing its oil output as quickly as the U.S., and that production is helping to offset the shortfalls created by the upheavals in other countries. On Tuesday, Anas Alhajji, the chief economist at NGP Energy Capital Management in Dallas, told me that “there’s no doubt that the shale gale has helped keep a lid on oil prices.”
Although Alhajji wouldn’t provide any estimates for what global oil prices might be without the surge in U.S. production, it’s easy to imagine their coming close to, or eclipsing, the $150 a barrel they hit back in 2008.
The savings to the U.S. economy from the surge in natural-gas production are equally obvious. Over the six-year period from 2003 to 2008, U.S. natural-gas prices averaged about $7 per thousand cubic feet. Today, the spot price for natural gas is about $3.50. To make the math simple, let’s assume a price reduction of $3 per million cubic feet. With the U.S. now consuming about 70 billion cubic feet per day, the drop in natural-gas prices is saving consumers about $210 million per day, or nearly $77 billion per year.
The shale gale has also created a huge economic stimulus. The flood of low-cost natural gas is leading to a resurgence in American manufacturing, in everything from fertilizers to steel. A study released last week by the consulting firm IHS estimated that development of “unconventional” oil and gas (a term that applies to shale and other “tight” geological formations) added nearly $300 billion — a whopping 2 percent — to America’s GDP in 2012. IHS also estimated that more than 2.1 million jobs in the U.S. are now supported by unconventional oil and gas activity and that the number could rise to 3.9 million jobs by 2025. Unemployment in America remains stubbornly high — in August, the rate stood at 7.3 percent — and new-job creation remains frustratingly slow. The latest data from the Bureau of Labor Statistics shows that only 63 percent of working-age Americans are now in the labor force. That’s the lowest percentage in 35 years.
What might those numbers look like in the absence of the shale gale? There’s simply no doubt that unemployment would be higher, perhaps dramatically so.
Recall that in 2007, Obama said he wanted to free America from “the tyranny of oil.” In 2011, he called oil “yesterday’s energy.” He also decried the profits being made by the oil and gas sector and declared that it was time to repeal the tax preferences given to it (which cost taxpayers about $4 billion per year), calling them “oil-company giveaways.”
But perhaps — perhaps — Obama has begun to see the light. On August 29, the White House released a document bragging about the surge in domestic oil production. That growth, it says, is “yet another reminder” that Obama is focused on “increasing America’s energy independence” and that it’s part of his “plan to create jobs, expand growth and cut the deficit.”
It appears that Obama has decided to jump in front of the shale parade and claim it as his own. Regardless of any White House spin, it’s abundantly obvious that without the shale gale, today’s economy would be hamstrung by higher oil prices, higher natural-gas prices, higher unemployment, and even slower economic growth.
And no president, no matter how married to the mirage of “green jobs,” wants those things during his (or her) tenure.
— Robert Bryce is a senior fellow at the Manhattan Institute. His most recent book is Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future.