Can the Natural Gas Sector Save the US Economy?
Exports & Bans
“There’s a silent oil and gas boom going on in this country,” says Kevin Swift, chief economist for the American Chemistry Council. “Eight years ago, everyone was writing off the U.S. petrochemical industry, but our competitiveness has improved so much in terms of the global cost curve that the U.S. and Canada are now second only to the Middle East.”
Apart from job creation and capital investment from industry, the glut of natural gas on the market is also creating export opportunities for drilling companies, says Canonica.
That would contribute further to GDP. Just how much, remains unclear.
“There are 10 proposed export projects planned in the U.S. right now, so assuming politicians allow them to do it and we expect them to, it’s almost certain that natural gas companies will begin exporting to Asia and Europe,” he says, noting exports could begin as early as 2016.
That’s assuming prices don’t remain below $3 per mcf for long.
“The price of natural gas has to be high enough for these companies to continue drilling,” says Canonica. “In many locations, it’s not economical to drill when the price is below $3.50 per mcf.”
There’s also a contingent of politicians and activists who are lobbying to ban fracking out of concern it could contaminate groundwater supplies.
New York has placed a moratorium on fracking pending further study, while more recently in May 2012 Vermont became the first state in the nation to ban the process outright.
If more states follow suit, that could limit supply.
As drilling technology improves, however, and the industry becomes more efficient, natural gas will likely play an increasingly pivotal role in the story of economic recovery.
“This is the most significant development for this industry in 75 years,” says Swift, noting the last breakthrough was in the 1930s when the post-war boom led to innovations like thermoplastic polyurethane, which is used in everything from footwear, to mobile phones to medical devices. “It’s a positive shock to the economy.”