Twelve hundred dollars. According to a new study, that’s how much money the average American family gained in discretionary income last year as a consequence of the shale energy revolution.
Earlier today the consulting firm IHS released its latest look at the economic transformation being brought forth by the increased production of oil and natural gas from North America’s shale and tight rock formations.
These new supplies are the result of the novel application of two proven energy technologies – hydraulic fracturing and directional drilling. Together, they are giving a big shot in the arm to the American economy.
How big? The study, conducted on behalf of the American Chemistry Council, the American Petroleum Institute, and several other groups, suggests that the domestic petrochemical industry will see as much as $100 billion in new investment by 2025 thanks to shale energy. IHS projects that more than 300,000 new jobs related to chemical industry activity could be created as well.
Regular readers will know that ExxonMobil is progressing plans for a multi-billion dollar expansion at our Baytown, TX, petrochemical complex to capitalize on abundant supplies of American natural gas. If developed, the project is expected to create about 10,000 construction jobs, add about 350 permanent jobs to the company’s Baytown workforce of 6,500 and create an additional 3,700 jobs in the local community.
Of course, the benefits of shale energy production extend beyond the chemical industry. IHS calculates that the United States could experience a $258 billion increase in annual industrial production by 2020, a figure that rises to $328 billion by 2025.
No wonder that a Moody’s economist told USA Today, “It’s difficult to overstate the shale revolution’s profound contributions to the U.S. economy.”
It’s also somewhat difficult to grasp just how profound those economic contributions are. The beauty of this most recent IHS report is how it breaks down all those multi-billion dollar figures into numbers the layman can appreciate. The group calculated that abundant new supplies of energy are helping keep home electricity, heating and cooking bills down. Lower electricity costs are reflected in prices elsewhere in the economy, too.
All in all, IHS attributed $163 billion in economic gains to U.S. households last year – or $1,200 per family.
That’s money that goes back into the economy to help buy groceries, pay for mortgages and college tuition, and save for retirement.
And that’s just for starters. IHS expects the average family’s annual gain in discretionary income to top $2,000 by 2015. By 2025, it should be $3,500 per year.
One of the report’s co-authors, IHS Vice President John Larson, told The Wall Street Journal, “We wanted to make this real to all Americans.” I would say his group succeeded.