Some of the most interesting news reports that warrant our attention often begin in libraries and universities where researchers labor meticulously and often in virtual anonymity. That certainly seems to be the case with an obscure report by Erik Gilje, Nikolai Roussanov and Robert Ready, three researchers at The Wharton School/University of Pennsylvania and the University of Rochester.
The report—titled “Fracking, Drilling and Asset Pricing: Estimating the Economic Benefits of the Shale Revolution”—was published by the National Bureau of Economic Research. It’s both startling and yet encouraging. Here’s why:
The authors say that hydraulic fracturing generated $3.5 trillion in new wealth between 2012 and 2014 in spite of falling oil prices, and their findings suggest that today’s rising prices could be even better for the U.S. economy.
From 2012 to 2014, the shale oil industry generated 4.6 million new jobs due to an energy boom and the resulting low gas prices, the study says. While fracking created around 4.6 million net new jobs, only about 1.6 million of those were directly linked to the oil industry, while many of the rest were due to lower gas prices and the positive effect that had on the American economy.
The report is quite dense. Nonetheless, here’s an excerpt you’ll appreciate:
“We assess whether the economic impact of shale oil that we measure using asset prices translates into meaningful effects on the real economy. To do this, we estimate whether the cross-section of shale discovery announcement day returns contains information about changes in industry employment. We show that the shale discovery announcement returns have significant explanatory power for the cross-section of employment growth rates of U.S. industries, indicating that the effect we identify operates through real economic channels. In the aggregate, we estimate that during the shale oil period 4,600,000 (net) new jobs are linked with the development of shale oil technology. This represents a 4.2% increase in the number of jobs across the industries in our study, compared to the aggregate number of jobs at the beginning of the shale oil period.”
If that doesn’t get your attention, consider recent projections by Chris Warren, spokesman for the Institute for Energy Research, who reported that “opening up federal areas to energy production could create 2.7 million jobs over the next 30 years and lead to $20.7 trillion in economic activity over the next 37 years.”
$20.7 Trillion. Imagine that.