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Make Your Move: US Energy Production Promises Long-Term Economic Benefits

June 4, 2013
Oil and natural gas production in US is reshaping the energy landscape.

It has been almost 40 years since President Richard Nixon issued the challenge that "Americans will not have to rely on any source of energy beyond our own…The capacity for self-sufficiency in energy is a great goal. It is also an essential goal, and we are going to achieve it." Progress along that path certainly has been slow, but recent developments in the U.S. energy industry have begun to revolutionize the global industry market. 

See Also: Manufacturing Industry Technology News & Trends

Consider some of the amazing energy changes occurring in the U.S. The availability and extraction of natural gas has to be placed at the top of the list. The Eagle Ford field on the Texas-Mexico border is a good place to begin. It was not long ago that producers had a 100% success rate in drilling a well every 28 days. They are now 100% successful every 13 days. Currently there are over 200 rigs working this shale field. In 2012, the field yielded 1,888 million cubic feet of natural gas per day. American innovation is keeping an abundant supply of natural gas available, expanding our manufacturing base, creating jobs and increasing tax revenue at all levels of government. 

Not only is natural gas providing the U.S. with a cheap, clean and dependable fuel source, but it is also enabling the U.S. to power the futures of other developing economies. Consider Mexico. Over the past decade, Mexico's consumption of natural gas has begun to outpace its production. Most recently, the U.S. Energy Information Agency stated that consumption was growing by 4% a year while production only rose 1.2%. With Mexico's use of natural gas at record highs, U.S. exports have risen to meet demand and now stand at 1.69 billion cubic feet per day. As Mexico's phenomenal growth as a manufacturing center for autos and aerospace continues, the ability of the U.S. to meet this insatiable hunger for energy is an economic win-win for both countries.

The immense potential of energy production from both U.S. oil and natural gas has begun to have a significant impact on the views of global energy leaders. Some believe that the U.S. could soon match Saudi Arabia's production level of 11 million barrels a day -- no small achievement. In a recent interview, Maria van der Hoeven, the executive director of the International Energy Agency, described the emerging dominance of North American energy as a "game changer" and a "supply shock that is sending ripples throughout the world." The agency's report also argued that "U.S. shale oil will help meet most of the world's new oil needs in the next five years, even if demand rises from a pick-up in the global economy." Experts are beginning to realize that OPEC and the constantly volatile Middle East may no longer have the rest of the world over the proverbial oil barrel. 

The advances in fracking and extraction technology have opened up not only these previously impregnable shale formations but also immense opportunities for the U.S. economy. Not only do domestic firms have an attractive source of new energy, but foreign firms are eyeing a move toward the United States. German-owned chemical giant BASF, Austrian steelmaker Voestalpine, and Royal Dutch Shell have announced plans for expanding operations in the U.S., bringing increased productivity, innovation and employment to the U.S. economy.

When taken together with the trends of near-sourcing and increased domestic manufacturing, these developments in U.S. energy production presage a long-term positive economic environment for U.S. manufacturers. While we are currently seeing slower growth in 2013 and expect a slight contraction in 2014, we expect the U.S. and world economies will see reaccelerating growth beginning in 2015. Preparing now to take advantage of newer and cheaper energy sources such as natural gas will put you in an excellent competitive position once global growth picks up speed. 

For more from Alan, check out the Make Your Move blog.

Contributing Editor Alan Beaulieu is an economist and president of ITR ( He is co-author, with his brother Brian, of "Make Your Move," a book on spotting business-cycle trends.

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